Quick Summary
The Central Board of Direct Taxes has released theIncomeTax (16th Amendment) Rules, 2021 to further make amendments in theIncome Tax Rules, 1962 wherein, an amendment has been made in the computation of Fair Market Value of Capital Assets for the purposes of section 50B of the Income Tax Act. Read t
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FAQ :
The amendment aims to update the rules for calculating the fair market value of capital assets when a business undertaking or division is sold via a slump sale, as per Section 50B of the Income Tax Act.
The new rules introduce two methods: FMV1, which is based on the book value of assets minus certain liabilities, and FMV2, which is based on the consideration received or accruing from the transfer.
For the purposes of Section 50B, the higher value between FMV1 and FMV2 will be used.
These rules are part of the Income Tax (16th Amendment) Rules, 2021, and were notified on 24th May 2021.
FMV1 is calculated as the book value of assets (excluding certain items like jewellery, shares, and property) minus specific deductions, plus the value of jewellery, artistic work, shares, securities, and immovable property, and then subtracting book value of liabilities.
FMV2 is calculated as the sum of monetary consideration received, the fair market value of non-monetary consideration represented by property under rule 11UA, the open market value of other non-monetary property, and the stamp duty value of any immovable property.
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