Carry-Forward Losses Face New Hurdle in the new Income Tax Bill: The 51% ‘Same Person’ Requirement

 

Under the current Section 79 of the Income-tax Act, 1961, losses of a closely held company can be carried forward and set off only if at least 51% of the voting power is beneficially held by the same “persons” who held those shares on the day the losses were incurred.

Now Sec 119(3) of the Income Tax Bill, 2025) states that, the same single person must beneficially hold ≥51% in both years.This means any internal redistribution among multiple shareholders—even within the same group—can break the test unless one person consistently stays above 51%.

Impact:
Group restructurings, intra-group transfers, and mergers will more often trigger loss forfeiture.
Tax planning for maintaining losses will now require continuity of a controlling shareholder, not just continuity of a controlling group.