Slump Sale Valuation Under the New Law: Section 77 of the Income-tax Act 2025 and Rule 53 of the Income-tax Rules 2026

If your business is selling a division or an entire undertaking on or after 1 April 2026, the tax computation no longer lives where you last left it. The old Section 50B and Rule 11UAE are gone. Slump-sale capital gains are now governed by Section 77 of the Income-tax Act, 2025, and the fair market value of what is transferred is computed under Rule 53 of the Income-tax Rules, 2026. The logic is largely carried forward, but the section numbers, the certification form, and several cross-references have changed – and citing the old provisions on a post-April-2026 deal is now a straightforward error.

In short: a slump sale is the sale of a whole business or division for one lump-sum price. Under the new law, the tax on that sale is not based purely on the price the parties agree – it is based on the fair market value (FMV) of the undertaking on the date of transfer, computed under Rule 53. This blog explains what a slump sale is, how it differs from an ordinary sale of assets, when Section 77 applies, and how the FMV is worked out.

Key Takeaways

• A slump sale is the transfer of a whole business or division as a going concern for a single lump-sum price, without assigning values to individual assets.
• New references: Section 50B → Section 77 (Act 2025); Rule 11UAE → Rule 53 (Rules 2026); Form 3CEA → Form No. 28 under Rule 54.
• Effective date: the new provisions apply to slump sales effective on or after 1 April 2026.
• Section 77 applies only if the transaction actually qualifies as a slump sale – not to an itemised sale where individual asset values are assigned.
• The tax value is the FMV of the undertaking on the date of transfer, computed under Rule 53 – not simply the agreed price.

Confused about which regime applies to your deal? Our valuation team helps founders, CFOs and CA firms get the slump-sale computation right the first time. → Schedule a Free Consultation

What Actually Changed: Old Regime vs New Regime

The Income-tax Act, 2025 rewrote and renumbered the entire statute. For slump sales, the substance of the computation is broadly the same – the drafting, references and forms are what moved. Here is the map you need before touching any deal file.

Item	Old regime (up to 31 March 2026)	New regime (on/after 1 April 2026)
Charging / computation provision	Section 50B, Income-tax Act, 1961	Section 77, Income-tax Act, 2025
FMV computation rule	Rule 11UAE, Income-tax Rules, 1962	Rule 53, Income-tax Rules, 2026
Non-monetary valuation cross-reference	Rule 11UA	Rule 57
Accountant’s certification	Form 3CEA	Form No. 28, under Rule 54
Holding period for long-term	More than 36 months	More than 36 months (retained)

The practical risk is simple: an ITR schedule or valuation report that still cites Section 50B or Rule 11UAE for a transaction effective after 1 April 2026 creates a visible discrepancy when the computation is cross-checked, and invites avoidable questions. Getting the citations right is the cheapest form of compliance insurance there is.

Slump Sale vs Itemised Sale: What Kind of Transaction Is This?

Before valuation, you have to be sure what kind of sale you are doing – because Section 77 applies to one and not the other. The simplest way to see the difference is to start with the ordinary case.

An itemised sale (the ordinary case)

In an itemised sale, you sell assets one by one and put a separate price on each. Suppose a company sells three machines for ₹20 lakh, ₹15 lakh and ₹10 lakh, and a warehouse for ₹50 lakh. Each asset has its own price tag, and each is taxed on its own. This is a normal transfer of assets – Section 77 does not apply to it.

A slump sale (a business sold whole)

In a slump sale, you sell an entire business or division as a running unit for one single price, without breaking that price down asset by asset. The buyer takes the business as a going concern – its assets, its liabilities, its operations – and pays one lump sum for the whole. Because no individual values are assigned, it is treated as a single transaction under Section 77, not as the sale of separate assets.

The same business, two ways – a numerical illustration

Imagine a company selling its bakery unit. Look at how the very same unit can be sold two different ways:

Feature	Scenario A	Scenario B
How the deal is priced	One lump sum of ₹10 crore for the whole bakery unit	₹4 cr for ovens, ₹3 cr for the building, ₹2 cr for the brand, ₹1 cr for stock
Values assigned to individual assets?	No	Yes
What is sold	The bakery unit as a running business	A list of separate assets
Tax treatment	Slump sale – Section 77 applies	Itemised sale – Section 77 does not apply

The lesson: it is not the business that decides the tax route – it is how the deal is structured. If the whole unit goes for one lump sum with no asset-wise pricing (Scenario A), it is a slump sale and Section 77 governs. The moment individual values are assigned to each asset (Scenario B),it becomes an itemised sale and Section 77 does not apply. One carve-out matters on real deals: under section 2(103)(b)(ii), a value put on an asset or liability for the sole purpose of stamp duty, registration fees or similar levies is not treated as assigning values, so a BTA that allocates a figure to immovable property purely for stamp duty does not lose slump-sale treatment. So the first question in any deal is: does this even qualify as a slump sale? Only if it does do Rule 53 and the FMV computation below come into play.

Why a Valuation Is Needed at All

Before the fair-market-value mechanism existed, slump-sale consideration was simply whatever the buyer and seller agreed. Because that figure rested on no prescribed method, undertakings could be transferred at artificially low prices – and the tax base leaked accordingly. The FMV concept was introduced to close that gap.

Under Section 77 read with Rule 53, the fair market value of the undertaking on the date of transfer is deemed to be the full value of consideration for computing tax on the sale. In plain terms: the price two parties negotiate is no longer the end of the tax story. If the prescribed FMV is higher than the agreed price, the FMV is what counts. That is precisely why a proper, rule-compliant valuation is not optional – it is the number the whole computation is built on. One caution on scope, though: FMV is only one side of Section 77. Section 77(3)(a) deems the net worth of the undertaking to be its cost of acquisition and cost of improvement, and Section 77(5) sets out how net worth is built – written-down value for depreciable assets, nil for self-generated goodwill, nil for assets whose cost has already been allowed as a deduction, book value for the rest, with revaluations ignored. The taxable gain is the FMV less that net worth, and it is the net worth, not the FMV, that the accountant certifies in Form No. 28. This blog covers the FMV side; the net worth computation deserves its own treatment.

What Exactly Is Being Valued: The Undertaking Transferred Under the BTA

The asset being valued in a slump sale is the undertaking that actually passes to the buyer under the Business Transfer Agreement (BTA) – not the whole company, and not every asset sitting on the seller’s books. Only the assets and liabilities transferred under the agreement enter the computation.

Take a fresh example. A logistics company sells its cold-storage division under a BTA. The warehouse, refrigeration equipment, inventory and staff move to the buyer. But the company keeps a specific bank loan tied to that division and settles it separately, and it also holds back a plot of vacant land recorded in the division’s books that the buyer did not want. Here, only the warehouse, equipment, inventory and related liabilities – the things that actually cross over – are part of the undertaking to be valued. The retained loan and the held-back land stay out of the computation, because they are not part of what the buyer is getting.

Get the transfer perimeter wrong – sweep in a retained liability, or miss an excluded asset – and the valuation comes out wrong. The BTA schedule of transferred assets and liabilities is therefore the single most important document the valuer works from.

Structuring a division sale and unsure what sits inside the transfer perimeter? → Talk to our valuation team before the BTA is signed.

The Date That Governs Everything: Transfer Date vs BTA Signing Date

Rule 53 fixes the valuation date clearly: the FMV is determined as on the date of the slump sale – the date the transfer actually takes effect. This is one of the most common sources of confusion, because a deal has several dates, and they are often weeks or months apart.

A typical slump-sale timeline runs like this:

1. Signing date – the day the BTA is executed. Terms are agreed, but the business has not yet changed hands.
2. Conditions precedent period – approvals, consents, and other closing conditions are satisfied.
3. Closing / completion date (the transfer date) – the day the undertaking actually passes to the buyer. This is the valuation date under Rule 53.

Take a separate example. Suppose a company signs the BTA to sell its printing division on 12 May 2026, but the division only actually transfers on completion on 20 August 2026, after approvals come through. The FMV must be computed as on 20 August 2026, and the balance sheet drawn up for the valuation must reflect the division’s assets and liabilities as on that transfer date – not the signing date, and not the last annual balance-sheet date. Valuing as on the wrong date is a frequent and entirely avoidable error.

How the FMV Is Computed Under Rule 53: FMV1 and FMV2

Rule 53 does not rely on a single number. It works out the FMV of the undertaking in two different ways – the rule calls them FMV1 and FMV2 – and then takes the higher of the two as the FMV of the undertaking. Both are computed as on the date of transfer. Here is what each one is.

FMV1 – the asset-based value (A + B + C + D − L)

FMV1 builds up the value of the undertaking from the assets being transferred:

• A = book value of all assets other than jewellery, artistic work, shares, securities and immovable property, as appearing in the undertaking’s books (reduced by certain items the rule specifies, such as income-tax paid net of refund, and any figure shown as an asset that is not really one).
• B = value of jewellery and artistic work, at the price they would fetch in the open market, on the basis of a valuation report obtained from a registered valuer. 
• C = fair market value of shares and securities, determined under Rule 57.
• D = stamp-duty value of immovable property.
• L = book value of the liabilities transferred, after excluding a specified list (such as equity paid-up capital, reserves and surplus other than those set apart towards depreciation, provisions for unascertained liabilities, and contingent liabilities).

FMV2 – the consideration-based value (E + F + G + H)

FMV2 builds up the value from what the seller actually receives for the undertaking:

• E = the monetary (cash) consideration received or accruing on the transfer.
• F = fair market value of non-cash consideration that is property referred to in Rule 57 (Table Sl. Nos. 1 to 5), determined under Rule 57.
• G = open-market value of other non-cash consideration – property other than immovable property that is not covered by Rule 57 (Table Sl. Nos. 1 to 5) – again on the basis of a valuation report obtained from a registered valuer.
• H = stamp-duty value of any immovable property received as consideration.

Whichever of FMV1 and FMV2 is higher becomes the FMV of the undertaking. You should never assume FMV1 (the asset-based figure) will be higher – for profitable or brand-led businesses, FMV2 (the consideration-based figure) often wins. The rule requires both to be computed and the higher one used.

Note: where the undertaking holds shares or securities, or where non-cash consideration is involved, their value is arrived at using Rule 57. We cover how Rule 57 works in a separate detailed blog on valuing shares and securities  – worth a read if that applies to your deal.

A Full Worked Example of the FMV Computation

Now that FMV1 and FMV2 are clear, here is one complete example showing both, computed as on the transfer date, with the FMV being the higher of the two.

Suppose ABC Foods Pvt. Ltd.  sells its Ready-to-Eat division as a going concern to under a BTA. As on the transfer date, the transferred undertaking includes plant and equipment, inventory and receivables, a factory building, and an investment in the unquoted equity shares of, a private company, held by the division.

Step 1 – the asset-based value (FMV1 = A + B + C + D − L)

• A = book value of other assets (plant, equipment, inventory, receivables), after the adjustments Rule 53 requires: ₹8.0 crore
• B = jewellery and artistic work: nil
• C = fair market value of the division’s investment in the unquoted equity shares of PQR Ingredients Pvt. Ltd., determined under Rule 57: ₹2.5 crore (this figure is arrived at using the Rule 57 method)
• D = factory building at stamp-duty value: ₹4.0 crore
• L = liabilities transferred, after the Rule 53 exclusions: ₹2.5 crore

FMV1 = 8.0 + 0 + 2.5 + 4.0 − 2.5 = ₹12.0 crore.

Step 2 – the consideration-based value (FMV2 = E + F + G + H)

Suppose the buyer pays partly in cash and partly by transferring a commercial office unit to the seller:

• E = cash consideration: ₹10.5 crore
• F = non-cash consideration valued under Rule 57: nil
• G = other non-cash consideration (movable) at open-market value: nil
• H = commercial office unit received, at stamp-duty value: ₹2.0 crore

FMV2 = 10.5 + 0 + 0 + 2.0 = ₹12.5 crore.

Step 3 – take the higher

FMV of the undertaking = higher of FMV1 (₹12.0 crore) and FMV2 (₹12.5 crore) = ₹12.5 crore. Here the consideration-based figure is higher, so it is the FMV that the rule requires you to use. Had the asset-based figure been higher, that would have governed instead – which is exactly why both must be computed.

Need a Rule 53–compliant FMV computation for a live deal? → Schedule a Free Consultation

Who Does the Valuation in Practice?

In practice, businesses obtain the FMV valuation report from a Chartered Accountant or a Registered Valuer (Securities or Financial Assets), who understands both the valuation mechanics and how the figure feeds into the tax computation. Two roles should not be run together, though. The Form No. 28 report under Rule 54 must come from an accountant as defined in section 515(3)(b), which a registered valuer cannot sign. And where components B and G of Rule 53 call for a “registered valuer”, that term is defined by Rule 56(f) as a valuer under section 513 of the Income-tax Act, 2025 – a separate income-tax register, not the IBBI registration under the Companies Act.

At MyValuation, this sits squarely in our wheelhouse – Parth Shah is both a Chartered Accountant and a Registered Valuer, so we handle the Rule 53 FMV computation and the related certification end to end. → Schedule a Free Consultation

Parth Shah’s Expert View

The mistake I see most often is teams treating the FMV computation as a formality bolted on after the deal is priced – working out only the asset-based figure and skipping the consideration-based one. On any profitable or brand-led division sale, the consideration side is often the higher figure, and if you have not computed it, your valuation is simply wrong. My practical advice: first confirm the deal actually qualifies as a slump sale, then fix the transfer perimeter and the transfer date in the BTA itself, and only then compute the FMV both ways as on that date. Get those three things right and everything downstream falls into place.

Summing Up

For any slump sale effective on or after 1 April 2026: first confirm the transaction genuinely qualifies as a slump sale rather than an itemised sale, then cite Section 77 and Rule 53, certify on Form No. 28, value the undertaking as on the transfer date, be precise about which assets and liabilities actually pass under the BTA, and compute the FMV both ways – asset-based and consideration-based – and use the higher. The computation is not conceptually new, but the references, the form, and the discipline around qualification, dates and transfer scope are exactly where deals go wrong.

Planning a division sale, hive-off or business transfer? MyValuation’s valuation specialists handle Rule 53 FMV computations and the related certification end to end. → Schedule a Free Consultation

FAQs

What is a slump sale?

A slump sale is the transfer of a whole business or division as a going concern for a single lump-sum price, without assigning separate values to the individual assets and liabilities transferred.

How is a slump sale different from an itemised sale?

In an itemised sale, each asset is sold with its own price tag and taxed separately. In a slump sale, the entire undertaking is sold for one lump sum with no asset-wise pricing. Section 77 applies only to a slump sale, not to an itemised sale.

Which section and rule govern slump-sale valuation now?

Slump sales are governed by Section 77 of the Income-tax Act, 2025, and the FMV of the undertaking is computed under Rule 53 of the Income-tax Rules, 2026. These replace the earlier Section 50B and Rule 11UAE for transactions effective on or after 1 April 2026.

Is the FMV the same as the price agreed in the BTA?

Not necessarily. The FMV under Rule 53 is worked out two ways – an asset-based value and a consideration-based value – and the higher is used. If that FMV exceeds the agreed price, the FMV is what counts for tax.

On what date is the slump-sale valuation done?

On the date of the slump sale – the date the undertaking actually transfers (the closing/completion date), not the BTA signing date or the last annual balance-sheet date. Rule 53 fixes this as the valuation date.

Which form does the CA certify the computation on?

Form No. 28, under Rule 54 of the Income-tax Rules, 2026, replaces the earlier Form 3CEA. Note what it certifies: section 77(4) requires the report to set out the computation of net worth and to certify that the net worth has been correctly arrived at – it is not a certificate of the FMV. It must be furnished before the specified date referred to in section 63, which section 63(5)(a) fixes as one month prior to the due date for the return under section 263(1), so it falls due before the return rather than with it.