Rule 50 of the Draft Income-tax Rules, 2026 lays down the methodology for attributing income taxed under Section 67(10) to capital assets remaining with a specified entity for purposes of Section 72(5). Where the excess amount received by a specified person (over their capital account balance) arises due to revaluation of capital assets or valuation of self-generated assets or goodwill, the taxable income must be proportionately attributed to remaining assets using the formula A = B × (C/D), ensuring allocation based on the relative increase in asset value. However, if such excess does not relate to revaluation or valuation, or relates solely to assets transferred to the specified person, no attribution is required. The rule mandates furnishing details in Form 27 within the prescribed due date, duly verified by the authorized signatory. It further clarifies that revaluation must be supported by a registered valuer’s report and disallows depreciation on revalued increments or recognized self-generated assets or goodwill. The rule ensures transparent allocation and prevents undue tax advantage from revaluation adjustments.
Extract of Rule No. 50 of Draft Income-tax Rules, 2026
Rule 50
Attribution of income taxable under section 67(10) to the capital assets remaining with the specified entity, under section 72.
(1) For the purposes of section 72(5), the amount chargeable to income-tax as income of specified entity under section 67(10), shall be attributed to capital asset remaining with the specified entity in a manner provided in this rule.
(2) Where the aggregate of the value of money and the fair market value of the capital asset received by the specified person from the specified entity, in excess of balance in his capital account, chargeable to tax under section 67(10) relates to revaluation of any capital asset or valuation of self-generated asset or self-generated goodwill, of the specified entity, the amount attributable to the capital asset remaining with the specified entity for purpose of section 72(5) shall be,
A= B*(C/D).
Where,
A= the amount attributable to the capital asset remaining with the specified entity for purpose of section 72(5);
B= amount charged under section 67(10) of the Act;
C= increase in, or recognition of, value of the asset remaining with the specified entity, because of revaluation or valuation;
D= aggregate of increase in, or recognition of, value of all assets because of the revaluation or valuation.
(3) Where the aggregate of the value of money and the fair market value of the capital asset received by the specified person from the specified entity, is in excess of the balance in his capital account, charged to tax under section 67(10) does not relates to revaluation of any capital asset or valuation of self-generated asset or self-generated goodwill, of the specified entity, the amount charged to tax under section 67(10) shall not be attributed to any capital asset for the purposes of section 72(5).
(4) Irrespective of anything contained in sub-rule (2) or (3), where the aggregate of the value of money and the fair market value of the capital asset received by the specified person from the specified entity, in excess of balance in his capital account, charged to tax under section 67(10) relate only to the capital asset received by the specified person from the specified entity, the amount charged to tax under section 67(10) shall not be attributed to any capital asset for the purposes of section 72(5).
(5) The specified entity shall furnish the details of amount attributed to capital asset remaining with the specified entity in Form No. 27.
(6) Form No. 27 shall be verified by the person who is authorized to verify the return of income of the specified entity under section 265. Draft Income-tax Rules, 2026 62
(7) Form No. 27 shall be furnished on or before the due date referred to in section 263(1)(c) for the tax year in which the amount is chargeable to tax under section 67(10).
(8) For the purposes of this rule,
(a) the amount chargeable to tax under section 67(10) shall relate to revaluation of any capital asset or valuation of self-generated asset or self-generated goodwill, of the specified entity, if the revaluation is based on a valuation report obtained from a registered valuer as defined in rule 56 (f)
(b) The specified entity shall not be entitled for the depreciation on,-
(i) the increase in value of an asset on account of its revaluation; or
(ii) the recognition of the value of a self-generated asset or self-generated goodwill, due to its valuation;
(c) the expressions “self-generated asset” and “self-generated goodwill” shall have the same meaning as assigned to them in section 67(11)(b) of the Act.
