Net Worth & Solvency Glossary · Entity Finance
A slump sale is the transfer of a business undertaking as a going concern for a single lump-sum price, without separate values being assigned to its individual assets and liabilities.
For tax purposes, the gain on a slump sale is worked out against the net worth of the undertaking transferred, computed under rules set by the Income-tax Act.
The same assets and liabilities, measured twice
The two almost never match, and that is expected. In practice both are prepared and reconciled.
Meaning
Three features mark out a slump sale.
What is transferred is a business activity that can be carried on independently, such as a division or a unit, not a collection of assets that never worked as a business.
The buyer takes over a working business.
If the parties price each asset separately, it is an itemised sale and is taxed as one, whatever the agreement calls it.
That is a slump sale. The parties may still record an allocation for stamp duty or registration without changing its character.
The Income-tax Act, 2025 defines a slump sale in section 2(103) (formerly section 2(42C) of the Income-tax Act, 1961).
The tax rule
The Income-tax Act, 2025 applies from 1 April 2026, for tax year 2026-27 onwards. For a slump sale it prescribes how the undertaking's net worth is computed under section 77 of the Income-tax Act, 2025 (formerly section 50B of the Income-tax Act, 1961, the law for transfers up to 31 March 2026).
Taken from the books of the undertaking being transferred.
The book figures are adjusted by rules the tax law sets.
That net worth is the cost of the undertaking for the gain computation.
The capital gain is the sale price (or the value the law requires to be used, if higher) less that net worth.
Because of these rules, the tax computation of an undertaking's net worth almost never matches the net worth in the accounts, or the net worth shown on any commercial certificate. That is expected, not a discrepancy to explain away. In practice, both figures are prepared and reconciled.
In practice
Three practical points govern compliance.
For years up to 2025-26, a chartered accountant's report in Form 3CEA was filed with the return.
a report from an accountant in Form 28, under Rule 54 of the Income-tax Rules, 2026 (formerly Form 3CEA), as section 77(4) requires
Depreciable assets enter the computation at their tax values, not their book values, which is the main reason the two figures differ.
The consideration is measured against a prescribed fair value, so agreeing a price below that value does not simply reduce the gain.
The provision is section 77(3)(b) of the Income-tax Act, 2025.
Valuation support is therefore part of the file from the start, particularly between related parties. A valuation report for the undertaking is a separate engagement from the net worth computation. How to structure or tax a slump sale is outside this entry.
Four ways to move a business
A slump sale is one of several ways to move a business.
The undertaking moves as a going concern for one lump sum.
Assets move individually at assigned values.
A business moves under a scheme approved by the tribunal or court.
The entity itself changes hands.
They differ in the approvals needed, the time they take and how the gain is computed.
Sources: Income Tax Department, the Income-tax Act 2025 in force from 1 April 2026 (incometaxindia.gov.in). This entry describes Indian practice in general terms and is not tax advice on a particular transaction.