The Finance Act, 2021 brought in many changes to the provisions relating to slump sale under the I-T rules. As per the provisions of section 50B, the actual consideration of the slump sale transaction was considered as the full value of consideration for the purpose of computation of capital gains. An amendment has been made in the Finance Act, 2021 to provide the fair market value of the undertaking on the date of transfer as the full value of consideration. Accordingly, fair market value will have to be considered irrespective of the transaction value actually received by the seller.

The rule provides two methods to calculate the FMV of the capital assets transferred by way of slump sale. This amendment pertaining to the determination of consideration amount on slump sale is said to be applicable retrospectively from FY 20-21. Therefore, assesses that have undertaken slump sale transactions in FY 20-21 may need to re-visit and if required re-compute their capital gains to determine any additional tax liability that could arise on the slump sale transactions undertaken by them in FY 20-21.

Therefore, assesses that have undertaken slump sale transactions in FY 20-21 may need to re-visit and if required re-compute their capital gains to determine any additional tax liability that could arise on the slump sale transactions undertaken by them in FY 20-21. These new rules for determining the deemed consideration amount may have an impact on slump sale transactions between group entities where the consideration amount is either nominal or restricted to the book value of the undertaking being transferred.