Provided that, if the entity that ceases to exist after the merger has any undeducted loss, such loss shall be deducted in equal installments over the next seven years. If the entity deducting the loss in equal installments is again divided before deducting the entire loss, tax shall be paid on the amount deducted as loss at the tax rate prevailing in the financial year of the merger (merger or acquisition).

(2) Where assets and liabilities are disposed of due to the merger of entities under sub-section (1), the following shall apply:-
(a) In the case of disposition of trading stock and business assets:-
(1) an amount equal to the net outgoings in respect of such asset immediately before the disposition shall be deemed to have been received by such person in respect of such disposition, and
(2) the person acquiring the asset shall be deemed to have incurred a cost equal to the amount mentioned in sub-clause (1).
(b) In the case of disposition of depreciable assets:-
(1) an amount equal to the written down value under the diminishing balance method for the group according to section 4 of Schedule 2 at the time of disposition shall be deemed to have been received in respect of such disposition, and
(2) the person acquiring the asset shall be deemed to have incurred a cost equal to the amount mentioned in sub-clause (1).
(c) In the case of disposition of liabilities:-
(1) an amount equal to the lower of the market value and the net receipts of such liability immediately before the disposition shall be deemed to be the cost incurred by such person in respect of the disposition, and
(2) the person assuming the liability shall be deemed to have received, in respect of assuming such liability, an amount equal to the amount mentioned in sub-clause (1).
(d) When calculating the cost of assets and liabilities of the merged entity, the acquiring entity or the entity resulting from the merger shall only calculate the cost in respect of the assets and liabilities that were held by the merging entity at the time of operating such merged business (prior to the merger or acquisition) according to clauses (a), (b), and (c).

(3) Tax shall be deducted on any additional lump sum payment (excluding payments made through a retirement fund or payments required as per employee service conditions) made for the purpose of collectively retiring employees working in the entity that was disposed of due to merger under sub-section (1) or in the post-merger entity, at a rate with a fifty percent discount on the tax deduction rate.

(4) If shareholders in the entity that was disposed of due to merger under sub-section (1) dispose of their shares by way of sale within two years of the merger, no capital gains tax shall be levied on the gain on such disposed shares.

(5) No tax shall be levied on dividends distributed by the entity that was disposed of due to merger under sub-section (1) to shareholders who were shareholders at the time of the merger within two years from the date of the merger.

(6) Entities of the same class seeking to merge and dispose under sub-section (1) shall submit a letter of intent Added by Finance Act, 2079. to the Department by the end of Ashadh, 2079.

(7) Entities submitting a letter of intent under sub-section (6) for merger under sub-section (1) must complete the merger process Added by Finance Act, 2079. by the end of Ashadh, 2080.