Rule 60 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 60 of the Income-tax Rules, 2026 conditions the carry forward of accumulated loss and unabsorbed depreciation on amalgamation on reaching 50% of installed capacity within four years and holding it to five years.
The two production conditions in rule 60
Sub-rule (1)(a): the amalgamated company, owning an industrial undertaking of the amalgamating company by way of amalgamation, shall:
- achieve the level of production of at least 50% of the installed capacity of the said undertaking before the end of four years from the date of amalgamation; and
- continue to maintain the said minimum level of production till the end of five years from the date of amalgamation.
Sub-rule (3): "installed capacity" means the capacity of production existing on the date of amalgamation. These are the conditions referred to in section 116(4)(b)(iii), and the 1962 parallel is rule 9C.
Because installed capacity is fixed as the capacity existing on the date of amalgamation, later expansion does not raise the bar and later closure of a line does not lower it. A company that doubles capacity after the merger still measures the 50% against the original figure — which usually makes the test easier, but also means capacity documentation as at the amalgamation date has to be preserved for five years.
Note also that the two limbs are different in kind. The first is an achievement test with a four-year deadline; the second is a maintenance test running to five years. Reaching 50% in year four and dropping below it in year five fails rule 60 just as surely as never reaching it at all.
The Form No. 29 certificate rule 60 requires
| Element | Requirement |
|---|---|
| What | A certificate in Form No. 29 showing particulars of production |
| To whom | The Assessing Officer |
| Verified by | An accountant as defined in section 515(3)(b), with reference to the books of account and other documents |
| When | Along with the return of income for the relevant tax year during which the prescribed level of production is achieved, and for subsequent relevant tax years falling within five years from the date of amalgamation |
So the certificate is not a one-off. It is filed in the year the level is first achieved and again in every subsequent year inside the five-year window — which is what evidences the maintenance limb.
Rule 60 requires the accountant to verify the certificate "with reference to the books of account and other documents showing particulars of production". Production records — not the financial statements alone — are the source. Where an undertaking's output is measured in several units or across several products, the basis of measuring "level of production" against installed capacity should be documented at the outset, because it has to be applied consistently for five years.
Relaxation of the rule 60 conditions
Sub-rule (2): on an application made by the amalgamated company, the Central Government may relax the condition of achieving the level of production, or the period during which it is to be achieved, or both, in suitable cases, having regard to:
- the genuine efforts made by the amalgamated company to attain the prescribed level of production; and
- the circumstances preventing such efforts from achieving the same.
Both limbs are needed. The power is not a general dispensation — it looks for effort on the company's side and an obstacle outside it. An amalgamated company heading for a shortfall should therefore build the evidence of both while the four-year period is still running, rather than after it has expired.
Worked example
| Facts | Position under rule 60 |
|---|---|
| Amalgamation effective 1 April 2026; installed capacity of the undertaking 1,00,000 units a year on that date | Benchmark is 50,000 units |
| Production reaches 52,000 units in tax year 2029-30 | Achieved before the end of four years |
| Filing for that year | Form No. 29 with the return |
| Tax year 2030-31, production 48,000 units | Maintenance limb fails inside the five-year window |
| Company expands capacity to 1,60,000 units in 2028 | Benchmark stays at 50,000 — capacity is fixed at the amalgamation date |
| Shortfall caused by a prolonged raw material disruption despite documented efforts | Application for relaxation under sub-rule (2) |
| Form No. 29 signed by management without accountant verification | Not a valid certificate |
Compliance checklist
- Record the installed capacity as at the date of amalgamation and preserve the supporting documents.
- Fix and document the basis of measuring production against that capacity.
- Track the four-year achievement deadline and the five-year maintenance period separately.
- Obtain Form No. 29 verified by an accountant under section 515(3)(b), against production records.
- File it with the return in the year of achievement and in every later year inside the five years.
- Monitor output after the level is first reached — the maintenance limb is where claims fail.
- Where a shortfall is likely, assemble evidence of genuine efforts and preventing circumstances and apply to the Central Government.
Common mistakes
- Measuring 50% against post-merger capacity rather than the capacity at the amalgamation date.
- Filing Form No. 29 once, in the year of achievement only.
- Treating the four-year test as the whole condition and ignoring maintenance to five years.
- Certifying from financial statements instead of production records.
- Applying for relaxation after the period has expired, with no contemporaneous evidence of effort.