Income Tax Act 2025: Section 77 for Tax Year 2026-27

Special provision for computation of capital gains in case of slump sale

[Section-77 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

Section 77(1) of Income Tax Act 2025

77(1) Any profits or gains arising from the slump sale effected in the tax year shall be chargeable to income-tax as long-term capital gains and shall be deemed to be the income of the tax year in which the transfer took place, subject to the provisions of sub-section (2).

Section 77(2) of Income Tax Act 2025

77(2) The profits and gains arising from a slump sale involving the transfer of a capital asset, being one or more undertakings or divisions owned and held by an assessee for 36 months or less, immediately before the date of its transfer, shall be treated as short-term capital gains.

Section 77(3) of Income Tax Act 2025

77(3) In relation to capital assets, being an undertaking or division transferred by way of slump sale,—

• (a) the “net worth” of the undertaking or division shall be deemed as the cost of acquisition and the cost of improvement for sections 72 and 73; and
• (b) the fair market value of the capital assets on the date of transfer, calculated in such manner, as prescribed, shall be deemed to be the full value of the consideration received or accruing as a result of such transfer.

Section 77(4) of Income Tax Act 2025

77(4) Every assessee, in the case of slump sale, shall furnish in the prescribed form a report of an accountant, before the specified date referred to in section 63, and the report shall––

• (a) include the computation of the net worth of the undertaking or division; and
• (b) certify that the net worth has been correctly arrived at as per the provisions of this section.

Section 77(5) of Income Tax Act 2025

77(5) For the purposes of this section,––

• (a) the “net worth” shall be the “aggregate value of total assets” of the undertaking or division, as reduced by the value of its liabilities as appearing in the books of account, and for computing net worth, any change in the value of assets due to revaluation shall be ignored;
• (b) the “aggregate value of total assets” shall,—
  • (i) for depreciable assets, be the written down value of the block of assets determined under section 41(1) (Table: Sl. No.3);
  • (ii) for capital asset being goodwill of a business or profession, which was not acquired by the assessee by purchase from a previous owner, be nil;
  • (iii) for capital assets for which the entire expenditure has been allowed or is allowable as a deduction under section 46, be nil; and
  • (iv) for other assets, be the book value.

FAQs on Section 77 of Income Tax Act 2025

1. What is the tax treatment of profits or gains arising from a slump sale under Section 77(1) of the Income Tax Act, 2025?

Profits or gains from a slump sale are chargeable to income-tax as long-term capital gains and are deemed to be the income of the tax year in which the transfer took place, subject to Section 77(2).

2. When is a slump sale treated as giving rise to short-term capital gains under Section 77(2)?

If the undertaking or division transferred by slump sale was owned and held for 36 months or less immediately before the transfer date, the profits and gains shall be treated as short-term capital gains.

3. What is considered the cost of acquisition and cost of improvement in a slump sale under Section 77(3)(a)?

The net worth of the undertaking or division is deemed to be the cost of acquisition and cost of improvement for sections 72 and 73.

4. How is the full value of consideration determined in a slump sale under Section 77(3)(b)?

The fair market value of the capital assets on the date of transfer, calculated in the prescribed manner, is deemed to be the full value of the consideration.

5. Is there any compliance requirement for the assessee in case of a slump sale?

Yes, every assessee must furnish a report of an accountant in the prescribed form before the specified date referred to in Section 63.

6. What must the accountant’s report include under Section 77(4)?

The report must include the computation of the net worth of the undertaking or division and certify that the net worth has been correctly arrived at according to the provisions of Section 77.

7. How is “net worth” defined for the purposes of Section 77(5)(a)?

Net worth means the aggregate value of total assets of the undertaking or division, reduced by the value of its liabilities as per the books of account, ignoring any revaluation of assets.

8. How is the “aggregate value of total assets” determined for depreciable assets under Section 77(5)(b)(i)?

For depreciable assets, the aggregate value is the written down value of the block of assets determined under section 41(1) (Table: Sl. No.3).

9. What is the value of goodwill for the purpose of computing net worth under Section 77(5)(b)(ii)?

For goodwill of a business or profession not acquired by purchase, its value is considered nil.

10. What is the value of capital assets fully allowed as a deduction under Section 77(5)(b)(iii)?

For capital assets where the entire expenditure has been allowed or is allowable as a deduction under section 46, the value is considered nil.

11. How is the value of other assets determined for computing net worth under Section 77(5)(b)(iv)?

For other assets, the book value as appearing in the books of account is considered.