The Central Board of Direct Taxes (CBDT) has released a comprehensive set of Frequently Asked Questions (FAQs) on Form No. 27, providing clarity on the reporting requirements related to capital assets that remain with a specified entity following its dissolution or reconstitution under the Income-tax Act, 2025.
The FAQs aim to help taxpayers, partnerships, LLPs, and other specified entities understand their compliance obligations under Section 67(10) of the Income-tax Act, 2025, which corresponds to Section 45(4) of the Income-tax Act, 1961.
What is Form No. 27?
Form No. 27 has been prescribed under Rule 50 of the Income-tax Rules and serves as a reporting mechanism for the amount of income attributable to capital assets that continue to remain with a specified entity after a dissolution or reconstitution event.
The form operationalises the methodology laid down under Rule 50 for attributing taxable income arising under Section 67(10) to such assets.
Who Needs to File Form No. 27?
According to the FAQs, every specified entity must furnish Form No. 27 where a specified person receives any capital asset, stock-in-trade, or both during a tax year in connection with the dissolution or reconstitution of that entity.
The filing requirement becomes mandatory when income is taxable under Section 67(10) and attribution of such income to remaining capital assets is required.
Filing Timeline and Mode
CBDT has clarified that Form No. 27 must be submitted along with the income tax return of the specified entity for the relevant tax year in which the transfer event takes place.
The form is event-specific and must be filed separately for each tax year in which a dissolution or reconstitution triggers taxation under Section 67(10).
Importantly, the form can only be filed electronically and is not available for offline submission.
Key Information Required in Form No. 27
The form seeks detailed disclosures, including:
- Particulars of the specified entity and relevant tax year
- Amount taxable under Section 67(10)
- Asset-wise attribution of taxable income
- Book value and revalued value of capital assets
- Classification of assets as short-term or long-term
- Details of the registered valuer
- Upload of the valuation report
The form also permits reporting of multiple capital assets and their corresponding attribution amounts.
Valuation Report is Mandatory
One of the most significant compliance requirements highlighted in the FAQs is the mandatory valuation of capital assets.
CBDT has stated that attribution under Rule 50 must be supported by a valuation report issued by a registered valuer. A copy of the valuation report must also be uploaded while filing Form No. 27.
This requirement is intended to ensure transparency and consistency in determining the amount attributable to retained assets.
Verification and Revision
Form No. 27 must be verified and signed by the authorised person or principal officer of the specified entity.
While the FAQs indicate that revision of the form may not be permitted unless specifically enabled through the electronic filing system, taxpayers are advised to carefully review all details before submission.
Consequences of Non-Compliance
The CBDT has cautioned that failure to file Form No. 27 or furnishing incorrect information may lead to disputes in the computation of capital gains, denial of deductions under Section 72(5), and possible proceedings under the Income-tax Act.
Given the potential tax implications, entities undergoing reconstitution or dissolution should ensure timely and accurate compliance.
Why Form No. 27 Matters
The introduction of Form No. 27 is aimed at ensuring proper implementation of Rule 50 and establishing a transparent framework for valuation-based attribution of income to retained capital assets.
By standardising reporting requirements and mandating independent valuation, the form is expected to reduce litigation and provide greater certainty in tax treatment during partnership reconstitution and dissolution events.
Tax professionals believe the detailed FAQs will help taxpayers better understand the practical aspects of compliance and avoid disputes arising from incorrect attribution of income under the new Income-tax Act, 2025 framework.
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