Section 44DB Income Tax Act: Co-operative Bank Reorganisation Deductions
Updated: 25 October 2026
Section 44DB of the Income-tax Act, 1961 provides special rules for allocating specified deductions when a co-operative bank undergoes an amalgamation, demerger or qualifying conversion into a banking company. The rules divide deductions between the predecessor and successor according to the number of days each is entitled to the allowance in the financial year.
Applicable law: Section 44DB is relevant to the Income-tax Act, 1961 regime. Section 64 of the Income-tax Act, 2025 contains the corresponding framework for tax years governed by the newer Act. Check the relevant assessment year and applicable amendments before filing.
1. What Section 44DB covers
Where a business reorganisation takes place during a financial year, Section 44DB(1) requires the following deductions to be computed under its special allocation rules:
- Section 32: depreciation on eligible business assets.
- Section 35D: amortisation of eligible preliminary expenses.
- Section 35DD: amortisation of qualifying amalgamation or demerger expenditure.
- Section 35DDA: amortisation of qualifying expenditure under a voluntary retirement scheme.
The provision was inserted by the Finance Act, 2007 with effect from 1 April 2008. The Finance Act, 2021 extended its scope to qualifying conversions of primary co-operative banks into banking companies. The earlier article did not reflect this subsequent change.
2. How deductions are apportioned
Predecessor bank (sub-section 2):
Successor bank or converted banking company (sub-section 3):
| Symbol | Meaning |
|---|---|
| A | Deduction that would have been allowable to the predecessor bank had the reorganisation not occurred. |
| B | Days from the first day of the financial year up to the day immediately before the reorganisation. |
| C | Total days in that financial year (365 or 366). |
| D | Days from the reorganisation date through the last day of the financial year. |
Illustration
Assume a deduction of Rs. 36,50,000 would otherwise be allowable, and a reorganisation occurs after the first 100 days of a 365-day financial year. The predecessor receives Rs. 10,00,000 (36,50,000 × 100 / 365); the successor receives Rs. 26,50,000 (36,50,000 × 265 / 365). This illustration assumes all other conditions for the deduction are met.
3. Deductions in subsequent years
Under Section 44DB(4), where an undertaking entitled to deductions under Sections 35D, 35DD or 35DDA is transferred before the end of the specified amortisation period, the successor co-operative bank or converted banking company can claim the remaining eligible deductions in later years as the predecessor would have done, subject to the statutory conditions. The special continuation rule in this sub-section does not list Section 32.
4. Important statutory definitions
Amalgamation
A merger of one or more amalgamating co-operative banks into an existing or newly formed amalgamated co-operative bank. Section 44DB(5) requires, among other conditions, transfer of the relevant assets and liabilities, continuity of members holding at least 75% of voting rights and continuity of shareholders holding at least 75% in value of shares, subject to the exclusions specified in the Act.
Demerger
Transfer of one or more undertakings of a demerged co-operative bank to a resulting co-operative bank. Statutory requirements include transfer of the undertaking's assets and liabilities at qualifying book values, proportionate membership, qualifying shareholder continuity of at least 75% by value, transfer on a going-concern basis and compliance with notified conditions.
Business reorganisation
Amalgamation or demerger of a co-operative bank, or qualifying conversion of a primary co-operative bank into a banking company.
Conversion and converted banking company
Conversion means the transition of a primary co-operative bank to a banking company under the specified Reserve Bank of India scheme referenced in Section 44DB. A converted banking company is the banking company formed by that conversion.
Predecessor and successor
The predecessor is the amalgamating bank, demerged bank or primary co-operative bank succeeded through conversion, as applicable. The successor is the amalgamated bank, resulting bank or converted banking company, as applicable. An amalgamating bank merges into another bank; an amalgamated bank receives or results from that merger. A demerged bank transfers an undertaking; a resulting bank receives it.
Co-operative bank and primary co-operative bank
The expressions are linked to the definitions in Section 5 of the Banking Regulation Act, 1949, including clauses (cci) and (ccv), respectively. The statutory definition should be checked rather than assuming every co-operative credit society qualifies.
5. Related tax provisions
Section 72AB of the 1961 Act deals separately with carry-forward and set-off of accumulated business losses and unabsorbed depreciation in eligible co-operative bank reorganisations. Section 47 contains specified capital-gains exclusions for qualifying transfers. These are separate from the annual deduction allocation under Section 44DB, and each has its own conditions.
6. Income-tax Act, 2025: corresponding Section 64
Section 64 of the Income-tax Act, 2025 addresses deduction allocation on co-operative bank reorganisation for the tax-year framework under that Act. It references deductions under Sections 33, 44 and 52(1) (Table, serial numbers 1 and 2), and expresses the predecessor and successor formulas together. It also provides for continuation of specified deductions after the transfer. The corresponding provision should be used for tax years to which the 2025 Act applies.
7. Official statutory references
- Income Tax Department: Section 44DB, Income-tax Act, 1961
- Income Tax Department: Income-tax Act, 2025 (see Section 64)
- Finance Act, 2021: amendment of Section 44DB
- Section 47: transactions not regarded as transfer
- Section 72AB: accumulated loss and unabsorbed depreciation
Frequently asked questions
Does Section 44DB allow an additional deduction?
No. It specifies how already eligible deductions are apportioned between entities when qualifying business reorganisation occurs.
Does Section 44DB apply to conversion into a banking company?
Yes, qualifying conversions of primary co-operative banks are covered following the 2021 amendment.
Are carried-forward losses covered by the same formula?
No. Carry-forward and set-off require separate consideration under Section 72AB and other applicable provisions.
This article is general legal and tax information, not a substitute for transaction-specific professional advice.