Fast-Track Demergers Hit Tax Roadblock: MCA's Streamlined Process Faces Major Hurdles
Business
M
Moneycontrol•14-01-2026, 15:49
Fast-Track Demergers Hit Tax Roadblock: MCA's Streamlined Process Faces Major Hurdles
- •Fast-track demergers, introduced by MCA to simplify corporate restructuring, are facing unexpected tax hurdles.
- •Unlike NCLT-approved demergers, fast-track demergers under Section 233 of the Companies Act currently lack tax neutrality under the Income Tax Act, 2025.
- •Companies undertaking fast-track demergers could face capital gains tax (12.5%-20%), while shareholders might be taxed up to 36% on shares received.
- •This discrepancy, likely a drafting gap, makes intra-group reorganizations commercially unviable and forces companies back to the slower NCLT route.
- •Experts urge clarification in Budget 2026 to align tax laws with corporate law and ensure the effectiveness of fast-track demergers.
Why It Matters: MCA's fast-track demerger initiative is undermined by a tax law discrepancy, making it commercially unviable.
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