Compare transfer proceeds with tax expenditure remaining unallowed
For tax year 2026–27, section 52 of the Income-tax Act, 2025 contains specific rules for capital expenditure on qualifying telecom spectrum and licence rights. A transfer can produce a deduction or capped business-income recapture rather than merely continuing the original annual amortisation. This guide, checked on 28 October 2026, concerns those rights and their tax register; it does not apply these new section numbers to FY 2025–26 / AY 2026–27 returns. Income-tax Act, 2025: section 52(1)–(4).
Establish the original allowance before calculating disposal
Table serial numbers 3 and 4 require the specified capital expenditure and actual payment. The initial year is the later of commencement of the telecom business and payment; the instalment period runs from that year through the year in which the paid-for right remains in force. Retain the actual licence or spectrum instrument, payment evidence and end year. A financial-statement intangible carrying amount is not automatically expenditure remaining unallowed for tax. Income-tax Act, 2025: section 52(1)–(4).
A full transfer below the unallowed amount can give a shortfall deduction
Under subsection (2)(a), where relevant capital transfer proceeds are below expenditure remaining unallowed, the difference is deductible for the transfer tax year. Identify proceeds on their actual capital character and reconcile earlier claims. Do not claim the same residual cost twice through both a disposal deduction and an unreconciled continuation of the annual schedule. Income-tax Act, 2025: section 52(1)–(4).
Above the unallowed amount, recapture is capped
Subsection (2)(b) charges the excess of capital transfer proceeds over expenditure remaining unallowed as business income, but only up to the difference between expenditure incurred and expenditure remaining unallowed. This cap corresponds to the prior-allowance bridge on the stated facts. It does not establish that a sale price above original cost is wholly tax-free; examine any other applicable tax consequence separately. Subsection (2)(c) also addresses a business no longer in existence. Income-tax Act, 2025: section 52(1)–(4).
Equal or higher proceeds stop the ordinary claim
Subsection (2)(d) denies the subsection (1) deduction for the transferred expenditure in the transfer year and subsequent years where capital proceeds equal or exceed the remaining unallowed expenditure. Compare on a consistent basis before booking an annual instalment. A proceeds figure equal to unallowed cost is not the same as a fresh deduction of that cost. Income-tax Act, 2025: section 52(1)–(4).
Partial transfers use their own remaining-life calculation
Where subsection (3) applies and subsection (2)(b) and (c) do not, subtract capital transfer proceeds from unallowed expenditure and divide the remainder by relevant tax years not expired at the beginning of the transfer year. Do not divide by the original licence term or start a new arbitrary period. Identify the precise part transferred and statutory conditions before selecting this computation. Income-tax Act, 2025: section 52(1)–(4).
Preserve exclusions and special transfers
Subsection (2)(e) provides continuity for the specified amalgamation or demerger transfer to an Indian company, rather than the ordinary disposal treatment. Subsection (4)(a) prevents the specified depreciation deduction where section 52 allowance has been claimed and allowed for the same telecom expenditure. Keep the tax schedule separate from book amortisation, reorganisation analysis and any additional disposal tax issue. All illustrative figures below assume verified eligibility and an ordinary transfer unless expressly stated otherwise. Income-tax Act, 2025: section 52(1)–(4).
Applicable primary references
Income-tax Act, 2025: section 52(1)–(4)
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Full transfer at a shortfall
Expenditure incurred is ₹1,00,00,000, prior allowance ₹40,00,000 and remaining unallowed expenditure ₹60,00,000. A full transfer for capital proceeds ₹40,00,000 gives a subsection (2)(a) difference of ₹20,00,000. Reconcile the original schedule so that the residual cost is not also claimed again.
Illustrative example 2: Recapture within the cap
On the same original ₹1,00,00,000 and unallowed ₹60,00,000, proceeds are ₹80,00,000. Excess over unallowed cost is ₹20,00,000; the cap is ₹40,00,000. Business-income recapture under the stated provision is ₹20,00,000.
Illustrative example 3: Proceeds above original cost
Using original expenditure ₹1,00,00,000 and unallowed cost ₹60,00,000, proceeds ₹1,30,00,000 exceed unallowed cost by ₹70,00,000. Capped recapture is ₹40,00,000. The further ₹30,00,000 is not characterised as exempt merely by this calculation; other applicable tax treatment requires separate analysis.
Illustrative example 4: Proceeds equal unallowed expenditure
Original expenditure ₹1,00,00,000, earlier allowance ₹40,00,000 and proceeds ₹60,00,000 give zero shortfall and zero excess over unallowed expenditure. Under subsection (2)(d), an otherwise scheduled ₹10,00,000 annual deduction is not also claimed for that transferred expenditure in this transfer year.
Illustrative example 5: Qualifying partial transfer
Assume subsection (3) applies, unallowed expenditure is ₹60,00,000, capital proceeds for the part transferred ₹20,00,000 and four relevant tax years remain at the beginning of the transfer year. Revised annual deduction is (₹60,00,000 − ₹20,00,000)/4 = ₹10,00,000. The original term is not the denominator.
Illustrative example 6: Initial remaining-life schedule
Assume qualifying capital expenditure ₹1,20,00,000 is actually paid, the business has commenced, and six tax years run from the applicable initial year through the right's final year. Annual equal instalment is ₹20,00,000. After two valid instalments, the unallowed balance is ₹80,00,000 before any transfer or other adjustment.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Fix the applicable enactment | Tax year and earlier-period distinction |
| 2 | Identify the qualifying right | Licence or spectrum grant and terms |
| 3 | Prove cost and payment | Invoices, payment records and capital classification |
| 4 | Establish the initial and final years | Commencement, payment and validity period |
| 5 | Reconcile previous tax allowances | Year-wise claims and relevant orders |
| 6 | Determine transfer scope | Full, partial or specified reorganisation |
| 7 | Classify capital proceeds | Agreement and consideration bridge |
| 8 | Apply the correct statutory branch | Shortfall, capped recapture or remaining-life rule |
| 9 | Check duplicate allowances | Ordinary instalment, depreciation and residual-cost register |
| 10 | Retain the closing reconciliation | Tax basis, book bridge and other disposal-tax analysis |
Sixteen practitioner FAQs
1. Which telecom expenditures are discussed?
The qualifying spectrum and licence capital expenditure in section 52(1), Table rows 3 and 4.
2. Does this guide use the earlier Act's section numbers?
No. It expressly addresses tax year 2026–27 under the 2025 Act.
3. Is book amortised cost necessarily the tax unallowed amount?
No. Reconcile the original expenditure and actual prior tax allowance.
4. What establishes the initial deduction year?
The later of the specified business commencement and actual payment events.
5. Is every licence amortised over five years?
No. The telecom rows use the remaining validity-year period stated in the table.
6. What happens on an ordinary full transfer below unallowed cost?
Subsection (2)(a) provides the difference deduction on its stated conditions.
7. Can the same residual cost be deducted twice?
No. Reconcile disposal treatment with the ordinary allowance schedule.
8. How is recapture limited?
The relevant excess is capped at incurred expenditure minus expenditure remaining unallowed.
9. Does the cap exempt all proceeds above original cost?
No such exemption follows; examine other applicable tax consequences.
10. What if proceeds exactly equal unallowed cost?
There is no shortfall or excess, and subsection (2)(d) stops the ordinary allowance for that transferred expenditure.
11. Can recapture apply after the business ceases?
Subsection (2)(c) addresses the stated transfer case as if business still existed.
12. Does every partial transfer use subsection (3)?
Check its express conditions, including the exclusion of subsection (2)(b) and (c) cases.
13. Which denominator is used for a qualifying partial transfer?
The relevant tax years not expired at the beginning of the transfer year.
14. Does a qualifying Indian-company amalgamation transfer follow the ordinary disposal rule?
Subsection (2)(e) supplies the specified continuity treatment; establish its conditions separately.
15. Can specified depreciation be claimed alongside this allowance?
Subsection (4)(a) restricts it for the covered expenditure where this section has been claimed and allowed.
16. What should the closing file distinguish?
Original cost, prior allowance, unallowed expenditure, proceeds, current treatment and any separate disposal-tax question.
Conclusion
Reconcile telecom spectrum and licence deductions under section 52, separating full-transfer shortfalls, capped recapture and remaining-life partial-transfer claims.