Demerger – Section 2(35) | Income-tax Act, 2025 vs 1961

§ 2(35) · Income-tax Act, 2025

Demerger

ITA 2025 · 2(35) ITA 1961 · 2(19AA)
Definition — Section 2(35)

Means the transfer by a demerged company of one or more of its undertakings to a resulting company pursuant to a scheme of arrangement under sections 230 to 232 of the Companies Act, 2013, in such a manner that: (a) all property of the undertaking immediately before the demerger becomes the property of the resulting company; (b) all liabilities relatable to the undertaking become the liabilities of the resulting company; (c) property and liabilities are transferred at book values, except where IND-AS compliance requires otherwise; (d) the resulting company issues shares to shareholders of the demerged company on a proportionate basis; (e) shareholders holding not less than three-fourths in value of the shares in the demerged company become shareholders of the resulting company; (f) the transfer is on a going concern basis; and (g) any conditions notified by the Central Government under section 116(7) are fulfilled.

Act Comparison
Income-tax Act, 2025
2(35)
Demerger
Income-tax Act, 1961
2(19AA)
Demerger
Key Points
  • Maps to Section 2(19AA) of the 1961 Act
  • Qualifying demerger is tax-neutral — no capital gains on transfer
  • Conditions include proportional share allotment and continuity requirements
💡 Practical Note

A demerger that doesn't meet all the statutory conditions becomes a taxable sale — companies must carefully structure the arrangement to qualify.

Published by Simplified Tax India — Clear, section-wise comparison of Income-tax Acts. ← Back to Section 2 Definitions Table
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