Sections 64 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.
When a co-operative bank is amalgamated, demerged or converted into a banking company part-way through a tax year, section 64 splits the year's deduction between the old and the new entity by days. Section 65 defines the terms used. This article reads both sections as per the Income-tax Act, 2025 as amended by the Finance Act, 2026; later amendments, rules and notifications should be checked. For help planning a reorganisation, see our tax planning advisory.
Where a business reorganisation of a co-operative bank takes place in a tax year, the deduction under section 33, section 44 or section 52(1) (Table, serial numbers 1 or 2) is allowed as per section 64. The predecessor gets the deduction in the ratio of days before the reorganisation; the successor or converted banking company gets it in the ratio of days from the date of reorganisation. An undertaking that is transferred continues to get the benefit in later tax years as if no reorganisation had occurred.
What section 64 does
Section 64(1) says that the deduction under section 33, section 44 or section 52(1) (Table, serial numbers 1 or 2), in a case where business reorganisation of a co-operative bank has taken place during the tax year, is allowed as per section 64. The text of section 64 does not itself describe what those three deductions are; for depreciation, the live note on section 33 explains section 33. Section 52 is covered in our separate article for the amortisation provisions.
The formula in section 64(2)
The amount of deduction allowable to the predecessor co-operative bank, to the successor co-operative bank or to the converted banking company is worked out by a formula:
| Who | Formula |
|---|---|
| Predecessor co-operative bank | (A × B) / C |
| Successor co-operative bank or converted banking company | (A × D) / C |
where:
| Symbol | Meaning |
|---|---|
| A | The deduction allowable to the predecessor co-operative bank if the business reorganisation had not taken place |
| B | Number of days from the 1st day of the tax year to the day immediately preceding the date of business reorganisation |
| C | Total number of days in the tax year in which the business reorganisation has taken place |
| D | Number of days from the date of business reorganisation to the last day of the tax year |
Because B + D = C, the two shares add up to A: the year's deduction is neither increased nor lost, only divided.
Continuity in later tax years: section 64(3)
Where an undertaking of the predecessor co-operative bank entitled to the deduction under section 44 or section 52(1) (Table, serial numbers 1 or 2) is transferred, before the expiry of the period specified in that section, to a successor co-operative bank or a converted banking company on account of business reorganisation, those provisions apply to the successor or converted company in the tax years after the year of reorganisation as they would have applied to the predecessor, as if the reorganisation had not taken place. The period itself is specified in section 44 or 52 and is not repeated in section 64.
Worked example
Harbour Valley Co-operative Bank is amalgamated into Riverside Co-operative Bank on 1 October. The tax year runs from 1 April to 31 March and has 365 days (assumed for the example). A = Rs. 3,65,000 (an invented figure for the deduction the predecessor would have had).
- B = days from 1 April to 30 September = 183.
- C = 365.
- D = days from 1 October to 31 March = 182 (and 183 + 182 = 365).
Predecessor: (3,65,000 × 183) / 365 = Rs. 1,83,000. Successor: (3,65,000 × 182) / 365 = Rs. 1,82,000. Total = Rs. 3,65,000 = A.
Section 65: the definitions for section 64
Section 65 applies "for the purposes of section 64". Its twelve clauses are summarised here.
| Clause | Term | What the Act says |
|---|---|---|
| (a) | Amalgamation | Merger of an amalgamating co-operative bank with an amalgamated co-operative bank, if all assets and liabilities (other than assets transferred by sale or distribution on winding up) become those of the amalgamated bank; members holding 75% or more voting rights become members of it; and shareholders holding 75% or more in value of shares (other than those held by the amalgamated bank, its nominee or its subsidiary immediately before the merger) become its shareholders |
| (b) | Amalgamating co-operative bank | A co-operative bank which merges with another, or every co-operative bank merging to form a new one |
| (c) | Amalgamated co-operative bank | The bank with which one or more amalgamating banks merge, or the bank formed as a result of the merger of two or more |
| (d) | Business reorganisation | Reorganisation involving the amalgamation or demerger of a co-operative bank, or conversion of a primary co-operative bank |
| (e) | Conversion | Transition of a primary co-operative bank to a banking company under the Reserve Bank of India scheme as may be notified by a circular dated 27 September 2018 (the circular number is printed in the Act) |
| (f) | Converted banking company | A banking company formed as a result of conversion from a primary co-operative bank |
| (g) | Demerger | Transfer by a demerged co-operative bank of one or more undertakings to a resulting co-operative bank, meeting six conditions listed below |
| (h) | Demerged co-operative bank | The bank whose undertaking is transferred, pursuant to a demerger, to a resulting bank |
| (i) | Predecessor co-operative bank | The amalgamating bank, the demerged bank, or the primary co-operative bank succeeded as a result of conversion |
| (j) | Primary co-operative bank | Has the meaning given in clause (ccv) of section 56 of the Banking Regulation Act, 1949 |
| (k) | Resulting co-operative bank | One or more banks to which the undertaking is transferred in a demerger, or any bank formed as a result of demerger |
| (l) | Successor co-operative bank | The amalgamated co-operative bank or the resulting bank |
The Banking Regulation Act, 1949 is another law; check that law for the meaning it gives. The text of section 65(e) refers to a Reserve Bank of India scheme and circular; what scheme or conditions apply is a matter of that circular and is not in the text consulted.
The six conditions for a demerger: section 65(g)
- All assets and liabilities of the undertaking or undertakings immediately before the transfer become those of the resulting co-operative bank.
- They are transferred at values (other than change in value consequent on revaluation) appearing in its books immediately before the transfer.
- The resulting bank issues, in consideration, its membership to the members of the demerged bank on a proportionate basis.
- Shareholders holding 75% or more in value of shares in the demerged bank (other than shares already held by the resulting bank, its nominee or its subsidiary) become shareholders of the resulting bank, otherwise than as a result of the acquisition of assets of the demerged bank or any undertaking.
- The transfer is on a going concern basis.
- The transfer is as per the conditions specified by the Central Government by notification, having regard to the necessity to ensure that the transfer is for genuine business purposes. The notification is not in the text consulted.
Need help with a co-operative bank reorganisation?
A merger, demerger or conversion changes who may claim a deduction and for how many days of the year. Our tax planning advisory team can help you map the date of reorganisation against the day-count formula in section 64(2) and review the continuity rule in section 64(3).
Key takeaways
- Section 64 applies to deductions under sections 33, 44 and 52(1) (Table, serial numbers 1 or 2) in the year of a co-operative bank reorganisation.
- Predecessor share = A × B / C; successor or converted banking company share = A × D / C.
- The day on which the reorganisation takes place counts in D, not in B.
- A transferred undertaking continues to qualify in later years as if no reorganisation had taken place.
- Section 65 defines amalgamation, demerger and conversion; several elements depend on notifications and a Reserve Bank circular that are not in the Act.
Read next
- Sections 59–60: non-resident royalty and head office expenditure
- Section 61: presumptive income of non-residents
- Section 63: tax audit
- Income-tax Act 2025 Chapter IV: computation of total income
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.