IT Dept prescribes hybrid formula for determining FMV of capital assets in slump sale
May 25, 2021
Budget 2021 amended the tax law on fair market value
The Income Tax Department has notified rules for computation of fair market value of capital assets (FMV) in slump sale. Experts feel that these rules will create difficulty in tax planning for some businesses.
These rules titled ‘Computation of Fair Market Value of Capital Assets for the purposes of section 50B of the Income-tax Act’ are part of follow-up action after Finance Act 2021 amended the said section. These rules prescribe two options (FMV 1 and FMV 2). The option giving higher value will be FMV of the capital assets in slump sale. It may be noted that slump sale for tax calculation means when a company or undertaking is sold without considering the individual values of the assets or liabilities contained within the undertaking.