Rule 53 of the Draft Income-tax Rules, 2026 provides the mechanism for computing the fair market value (FMV) of capital assets transferred through slump sale under Section 77. The FMV shall be the higher of FMV1 (asset-based valuation) or FMV2 (consideration-based valuation). FMV1 is calculated as the aggregate book value of assets (with specified exclusions and adjustments), plus market value of jewellery and artistic work based on a registered valuer’s report, FMV of shares and securities as per Rule 57, and stamp duty value of immovable property, reduced by book value of liabilities excluding items such as equity capital, reserves, unascertained provisions, and contingent liabilities. FMV2 represents the aggregate of monetary consideration and fair market value of non-monetary consideration, including stamp duty value of immovable property and valuation-based pricing for other assets. Valuation is determined as on the date of slump sale. By prescribing a higher-of-two formula approach, the rule ensures anti-abuse protection, prevents undervaluation of business transfers, and strengthens transparency in slump sale taxation.
Extract of Rule No. 53 of Draft Income-tax Rules, 2026
Rule 53
Computation of fair market value of capital assets for the purposes of section 77 of the Income tax Act.
(1) For the purpose of section 77(3)(b), the fair market value of the capital assets shall be the FMV1 determined under sub-rule (2) or FMV2 determined under sub-rule (3), whichever is higher.
(2) The FMV1 shall be the fair market value of the capital assets transferred by way of slump sale determined in accordance with the formula—
A+B+C+D – L, where,
A =book value of all the assets (other than jewellery, artistic work, shares, securities and immovable property) as appearing in the books of accounts of the undertaking or the division transferred by way of slump sale as reduced by the following amount which relate to such undertaking or the division, —
(i) any amount of income-tax paid, if any, as reduced by the amount of income tax refund claimed, if any; and
(ii) an y amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;
B = the price which the jewellery and artistic work would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer; Draft Income-tax Rules, 2026 64
C = fair market value of shares and securities as determined in the manner provided in rule 57;
D = the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property; L= book value of liabilities as appearing in the books of account of the undertaking or the division transferred by way of slump sale, but not including the following amounts which relates to such undertaking or division, namely: —
(i) the paid-up capital in respect of equity shares;
(ii) the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company;
(iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;
(iv) any amount representing provision for taxation, other than amount of income-tax paid, if any, as reduced by the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;
(v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities;
(vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares.
(3) FMV2 shall be the fair market value of the consideration received or accruing as a result of transfer by way of slump sale determined in accordance with the formula—
E+F+G+H, where,
E = value of the monetary consideration received or accruing as a result of the transfer;
F = fair market value of non-monetary consideration received or accruing as a result of the transfer represented by property referred to in rule 57 (Table: Sl.No 1 to 5) determined in the manner provided in rule 57 for the said property;
G = the price which the non-monetary consideration received or accruing as a result of the transfer represented by property, other than immovable property, which is not covered in rule 57 (Table: Sl.No 1 to 5), would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer, in respect of property;
H = the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property in case the non-monetary consideration received or accruing as a result of the transfer is represented by the immovable property.
(4) The fair market value of the capital assets under sub-rule (2) and sub-rule (3) shall be determined on the date of slump sale and for this purpose valuation date referred to in rule 57 shall also mean the date of slump sale.
(5) For the purposes of this rule,
(i) the expression “registered valuer” and “securities” shall have the same meanings as respectively assigned to them in rule 56.
(ii) the expression “artistic work” means archaeological collections, drawings, paintings, sculptures or any work of art
