Income-Tax NOC In M&A Transactions - Practical Considerations

Introduction

In any M&A transaction involving Indian companies, considering whether to impose an obligation on the seller to obtain a No-Objection Certificate (“NOC”) from the Indian income tax authorities under section 499 of the Income-tax Act, 2025 (“IT Act”) (erstwhile section 281 of the Income-tax Act, 1961) is often a key issue from a deal execution and risk allocation perspective. However, the complexities and challenges associated with obtaining an NOC often create friction between the buyer and seller. It is therefore important to understand the legal framework, the significance of obtaining the NOC, potential consequences of not obtaining it and the practical approaches generally adopted by the parties in M&A transactions.