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Rule 53Published

Rule 53: Slump-sale fair market value calculation

Rule 53 calculates fair market value for the section 77 slump-sale provision. It requires two valuations—FMV1 for transferred capital assets and FMV2 for the consideration—and uses whichever is higher.

Official notified Income-tax Rules, 2026

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Bare law

Rule 53 - Computation of fair market value of capital assets for purposes of section 77

(1) For the purposes 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) any 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; 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; and 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; and (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.Nos. 1 to 5] determined in the manner provided in the said rule 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; and 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-rules (2) and (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,– (a) "artistic work" means archaeological collections, drawings, paintings, sculptures or any work of art; and (b) the expressions "registered valuer" and "securities" shall have the meanings as respectively assigned to them in rule 56.

Rule breakdown

Calculate both values before choosing the higher

FMV1 is computed under sub-rule (2), and FMV2 under sub-rule (3). The rule uses the higher, so an agreed transaction price alone is not the entire exercise.

Identify the undertaking or division transferred, its assets and liabilities, and every cash and non-cash element of consideration.

FMV1: asset values less the defined liabilities

The formula is A+B+C+D−L. A begins with the book value of assets other than the specified separate categories, then removes the stated tax and non-asset amounts. Jewellery and artistic works use the registered-valuer market-price component, shares and securities follow Rule 57, and immovable property uses the stated stamp-duty value.

Reconcile each asset to one component to avoid duplication. The formula deliberately substitutes special values for some categories rather than using all book values unchanged.

Do not deduct every balance-sheet item as L

The liability component excludes the listed equity capital, certain undeclared dividend amounts, reserves and surplus other than depreciation reserves, specified excess tax provisions, unascertained-liability provisions and the stated contingent liabilities.

The contingent-liability exclusion preserves the exception for arrears of dividends on cumulative preference shares. Review each liability and reserve against the exact list instead of importing the balance-sheet total wholesale.

FMV2: cash plus properly valued non-cash consideration

The formula E+F+G+H starts with monetary consideration. The non-monetary components separately cover the specified Rule 57 property categories, other non-immovable property valued using a registered-valuer report, and immovable property at the stated stamp-duty value.

Consideration received or accruing is relevant. A transaction with non-cash assets cannot be tested solely by the cash transferred.

Use the slump-sale date and appropriate valuation evidence

Both valuations are determined on the date of the slump sale. For this purpose the Rule 57 valuation date is also the slump-sale date.

Obtain the required reports and records for that date, and document the Rule 56 definitions where relevant. Do not use an unrelated year-end valuation without establishing that it satisfies the rule.

Comparison example and reporting

Hypothetical: properly computed FMV1 is ₹8 crore and FMV2 is ₹9 crore. Rule 53 uses ₹9 crore. If the two values are reversed, it still uses the higher ₹9 crore.

This selects the relevant fair market value; it is not by itself the complete taxable-gain or final-tax calculation. Reconcile the section 77 computation and the Rule 54 accountant’s report separately.

Key takeaways

Higher of two values

Compute both FMV1 and FMV2.

Defined liability deduction

L excludes the listed capital, reserves and other amounts.

Non-cash consideration matters

FMV2 includes its separately valued non-monetary components.

Sale-date valuation

Both values use the date of the slump sale.

Practical checklist

  • Prepare both valuation workings and reconcile every component.
  • Check liability exclusions individually.
  • Obtain required valuation and stamp-duty evidence for the sale date.

Avoid

  • Do not use only the agreed cash price.
  • Do not deduct the entire balance-sheet liabilities without applying L.

FAQs

Can the agreed cash price alone be used?

The rule requires both prescribed valuations and selects the higher, including relevant non-cash consideration.

Are all reserves deducted as liabilities?

No. The definition of L excludes reserves and surplus other than those set apart towards depreciation, along with the other listed exclusions.

Which valuation date applies?

The date of the slump sale for both calculations, including the relevant Rule 57 valuations.

Glossary

FMV1
The asset-side value computed under Rule 53(2).
FMV2
The consideration-side value computed under Rule 53(3).
Artistic work
The listed archaeological collections, drawings, paintings, sculptures or other works of art.

Official sources