Slump Sale Valuation in India: Fair Market Value under Section 77

India, from Chennai+91 91760 44244

By CA V. Viswanathan, FCA, ACS, CFE, IBBI Registered Valuer (IBBI/RV/03/2019/12333). V Viswanathan & Associates, Chartered Accountants, FRN 013713S. Law stated as at 13 November 2026.

A slump sale valuation works out the fair market value of an undertaking transferred for a lump sum, and its net worth, so that the seller's capital gains can be computed. Under section 77 of the Income-tax Act, 2025 (section 50B of the 1961 Act) the fair market value is deemed to be the sale consideration, and Rule 53 of the Income-tax Rules, 2026 (formerly Rule 11UAE) fixes it as the higher of two formula values, FMV1 and FMV2. The seller also needs an accountant's report certifying the net worth. V Viswanathan & Associates prepares the computations and the report and serves clients across India from Chennai.

What is a slump sale valuation?

A slump sale is the transfer of one or more undertakings for a lump sum, without values being assigned to individual assets and liabilities. Because no asset has its own price, income-tax law taxes the seller on the undertaking as a whole. It also does not accept the agreed price at face value: the fair market value of the undertaking, worked out by a prescribed formula, is deemed to be the sale consideration if it is higher. That rule was brought into section 50B by the Finance Act, 2021 with effect from assessment year 2021-22, and the formula was notified on 24 May 2021 (Notification No. 68/2021). A slump sale valuation computes that fair market value and the net worth that is set against it.

What does the law provide?

Point	Rule	Source
Charge	Profits from a slump sale are long-term capital gains of the tax year of transfer	Section 77(1), Income-tax Act, 2025; section 50B of the 1961 Act for earlier years
Short-term cases	Short-term capital gains if the undertaking was held for thirty-six months or less	Section 77(2)
Cost	The net worth of the undertaking is deemed to be the cost of acquisition and improvement	Section 77(3)(a)
Consideration	The fair market value of the capital assets on the date of transfer, calculated as prescribed, is deemed to be the full value of consideration	Section 77(3)(b)
Prescribed method	The higher of FMV1 and FMV2	Rule 53, Income-tax Rules, 2026; Rule 11UAE of the 1962 Rules for earlier years
Report	A report of an accountant computing and certifying the net worth, furnished before the specified date, in Form No. 28 (Form 3CEA under the 1962 Rules)	Section 77(4); Rule 54
Net worth	Aggregate value of total assets less liabilities in the books, ignoring any revaluation; depreciable assets at written down value; self-generated goodwill at nil	Section 77(5)

How are FMV1 and FMV2 worked out?

FMV1 is the fair market value of what is transferred: A + B + C + D − L. A is the book value of the undertaking's assets other than jewellery, artistic work, shares, securities and immovable property. B is the open-market price of jewellery and artistic work on a registered valuer's report. C is the fair market value of shares and securities under the share valuation rule. D is the stamp duty value of immovable property. L is the book value of the undertaking's liabilities, leaving out capital, reserves, unascertained provisions and contingent liabilities.

FMV2 is the fair market value of what is received: E + F + G + H. E is the monetary consideration. F is non-monetary consideration in the form of shares, securities, jewellery or artistic work, valued under the share valuation rule. G is any other non-monetary consideration, at open-market price on a registered valuer's report. H is the stamp duty value of immovable property received. Both are measured on the date of the slump sale, and the higher is the deemed consideration.

Who can sign a slump sale valuation?

Purpose	Registered Valuer	Merchant Banker	Chartered Accountant
Net worth report under section 77(4)	Not accepted	Not accepted	Yes. Required: the Act asks for a report of an accountant
FMV1 and FMV2 computation	Needed for jewellery, artistic work and other non-monetary consideration	Not named	Normally computed by the chartered accountant with the net worth
Commercial value of the undertaking, to negotiate or justify the lump sum	Yes. Usual choice	Yes	Yes

CA V. Viswanathan is a chartered accountant and an IBBI Registered Valuer for securities or financial assets (IBBI/RV/03/2019/12333). His registration can be checked on the IBBI register of registered valuers. We prepare the tax computation as chartered accountants and, where the parties want an independent view of the price, a business valuation of the undertaking as registered valuer.

Worked example: deemed consideration and capital gains

Illustrative figures, not a real client. A company sells its packaging division, held for more than thirty-six months, for a lump sum of ₹24,00,00,000 in cash. The net worth of the division under section 77(5) is ₹15,00,00,000.

Item	Basis	Amount
A: assets other than property and investments	Book value	₹30,00,00,000
B: jewellery and artistic work	None	₹0
C: shares and securities	Fair market value under Rule 57	₹2,00,00,000
D: immovable property	Stamp duty value (book value ₹5,00,00,000)	₹12,00,00,000
L: liabilities of the division	Book value	₹18,00,00,000
FMV1 = A + B + C + D − L		₹26,00,00,000
FMV2 = cash received		₹24,00,00,000

Deemed consideration: the higher of ₹26,00,00,000 and ₹24,00,00,000 = ₹26,00,00,000.
Long-term capital gains: ₹26,00,00,000 − net worth ₹15,00,00,000 = ₹11,00,00,000.
On the agreed price alone the gain would have been ₹9,00,00,000. The seller is taxed on ₹2,00,00,000 more than it received, because the factory land enters the formula at stamp duty value.

How the deemed consideration and the gain are worked out.

What approvals and other taxes apply?

Shareholder approval: the Board of a public company can sell, lease or otherwise dispose of the whole or substantially the whole of an undertaking only with a special resolution (section 180(1)(a), Companies Act, 2013). Section 180 does not apply to a private company, under the exemption notification of 5 June 2015; its articles or shareholders' agreement may still require consent.
GST: services by way of transfer of a going concern, as a whole or an independent part of it, carry a nil rate (Sl. No. 2, Notification No. 12/2017-Central Tax (Rate), 28 June 2017). The exemption depends on the business being transferred as a going concern, so the agreement and the facts have to show that.

Why value the undertaking separately?

The tax formula is built from book values and stamp duty values. It says nothing about what the business earns. The buyer and seller negotiate on earnings, and the Board of each company has to be able to show how the lump sum was arrived at. A business valuation of the undertaking, usually by discounted cash flow with a market cross-check, serves that purpose; for a buyer following Ind AS it is also the starting point for the purchase price allocation.

What documents are needed?

Divisional balance sheet on the date of transfer, with a list of assets and liabilities going across
Written down value of the division's depreciable assets for tax
Stamp duty (guideline) value of immovable property on that date
Investments held by the division, with investee balance sheets
Draft business transfer agreement, including any non-cash consideration
Divisional profit and loss for three years and projections, for the commercial valuation

What is the process and how long does it take?

Scoping call: what is being transferred, for what consideration, and on what date.
Engagement letter with a fixed fee and document list.
Net worth, FMV1 and FMV2 computations.
Business valuation of the undertaking, where asked for.
Accountant's report and signed valuation report with UDIN.

Reports are usually issued within 5–7 working days of complete information, and within 15 working days for complex cases. The clock starts when the last document is received, not on the date of engagement.

What does a slump sale valuation cost?

Our fee for a slump sale valuation starts from ₹35,000 + 18% GST. The figure depends on the number of instruments or companies to be valued, whether projections exist, and how many laws the same transaction has to satisfy. We quote a fixed fee after a first call and before any work starts. Statutory filing fees, stamp duty and any merchant banker's fee are separate.

Related valuations

The share valuation rule that feeds item C is explained in share valuation for income tax under Rule 57. A transfer of a business for shares under a court scheme is covered in merger swap ratio valuation in India.

Every valuation report we issue, with the law behind it and the person who must sign it, is listed on our valuation services page.

About V Viswanathan & Associates

Chartered Accountants, FRN 013713S— Practising since 2012 from G-131, Spencer Plaza, Anna Salai, Chennai.
IBBI Registered Valuer— Securities or financial assets, CA V. Viswanathan (IBBI/RV/03/2019/12333), registered 30 September 2019.
FCA, ACS, CFE— Member of ICAI since 2012 and Fellow since 2017; company law, tax and forensic accounting in one practice.
Across India— Serves clients across India from Chennai through video consultations and digitally signed reports.

Frequently Asked Questions

How is fair market value computed in a slump sale?

As the higher of FMV1, the value of the capital assets transferred (A + B + C + D − L), and FMV2, the value of the consideration received (E + F + G + H), both on the date of the slump sale. The rule is Rule 53 of the Income-tax Rules, 2026, formerly Rule 11UAE.

Which section governs slump sale from 1 April 2026?

Section 77 of the Income-tax Act, 2025, which corresponds to section 50B of the Income-tax Act, 1961.

How is net worth calculated for a slump sale?

As the aggregate value of the undertaking's total assets less its liabilities as in the books, ignoring any revaluation. Depreciable assets are taken at written down value, self-generated goodwill at nil, and other assets at book value.

Is a slump sale taxed as long-term or short-term capital gains?

As long-term capital gains, unless the undertaking was owned and held for thirty-six months or less immediately before the transfer, in which case the gains are short-term.

Who certifies a slump sale?

The seller must furnish a report of an accountant that computes the net worth of the undertaking and certifies that it has been correctly arrived at (section 77(4)). The form is Form No. 28 under Rule 54 of the Income-tax Rules, 2026, which replaces Form 3CEA.

Can the sale price be lower than the fair market value?

The parties can agree any price, but for tax the fair market value under the prescribed rule is deemed to be the full value of consideration if it is higher than what was received.

Is a registered valuer needed for a slump sale?

Only for parts of the formula: jewellery and artistic work transferred, and non-monetary consideration other than shares and immovable property. A separate business valuation of the undertaking is optional but common.

Is GST payable on a slump sale?

A transfer of a going concern, as a whole or an independent part of it, is a supply of service taxed at nil rate under Sl. No. 2 of Notification No. 12/2017-Central Tax (Rate). A sale of individual assets that does not amount to a going concern does not get this treatment.

Is shareholder approval needed for a slump sale?

A public company needs a special resolution under section 180(1)(a) of the Companies Act, 2013 to sell the whole or substantially the whole of an undertaking. Section 180 does not apply to private companies, by the exemption notification of 5 June 2015.

How long does a slump sale valuation take?

Usually 5–7 working days from complete information for the tax computations, and up to 15 working days where a business valuation of the undertaking is also required.

Law stated as at 13 November 2026. Official sources: section 77, Income-tax Act, 2025, Rule 11UAE, Income-tax Rules, 1962, Rule 57, Income-tax Rules, 2026 (Income Tax Department). This page is general information, not advice on a specific transaction.