Businesses undergoing partnership restructuring, dissolution, or reconstitution may have a new compliance requirement to watch out for under the Income-tax Act, 2025.
Prescribed under Rule 50 of the Income-tax Rules, Form No. 27 has been introduced to report the amount attributed to capital assets remaining with a specified entity, particularly in situations where income becomes taxable under Section 67(10) of the Income-tax Act, 2025.
The form aims to bring transparency and consistency in the valuation and attribution of capital gains arising due to the transfer of assets during business restructuring events.
What is Form No. 27?
Form No. 27 is a compliance form that must be furnished by a specified entity to disclose the amount attributed to capital assets that continue to remain with the entity after a dissolution or reconstitution.
The requirement arises when a specified person receives capital assets, stock-in-trade, or both, triggering taxation under Section 67(10) of the Income-tax Act, 2025, a provision corresponding to the earlier Section 45(4) of the Income-tax Act, 1961.
In simple terms, the form ensures that income generated during such restructuring events is properly allocated to the assets that remain with the business.
Objective Behind Form No. 27
The primary objective of Form No. 27 is to operationalise the method prescribed under Rule 50 for attributing taxable income to the remaining capital assets of the specified entity.
This helps in:
- Ensuring proper tax computation during dissolution or reconstitution
- Maintaining transparency in valuation-based asset attribution
- Reducing litigation and tax disputes in capital gains computation
- Creating a documented trail for future assessments
Who is Required to File Form No. 27?
Form No. 27 must be filed by every specified entity where a specified person receives:
- Capital asset(s), or
- Stock-in-trade, or
- Both
during the tax year in connection with the dissolution or reconstitution of the specified entity.
This means firms, LLPs, or similar entities undergoing ownership restructuring may need to evaluate the applicability of the form carefully.
Is Filing Form No. 27 Mandatory?
Yes, filing Form No. 27 is mandatory in cases where income becomes taxable under Section 67(10) and attribution of income to capital assets is required under Rule 50.
Failure to comply may result in disputes related to capital gains computation and other tax implications.
Due Date: When Should Form No. 27 Be Filed?
The form must be furnished along with the return of income (ITR) of the specified entity for the relevant tax year in which the dissolution or reconstitution takes place and assets are transferred to the specified person.
Since the filing is linked to the ITR, taxpayers should ensure proper documentation before return submission.
What Details Need to Be Reported?
Form No. 27 requires comprehensive disclosures, including:
- Details of the specified entity
- Relevant tax year
- Amount taxable under Section 67(10)
- Asset-wise attribution details
- Book value and revalued value of assets
- Classification of assets as short-term or long-term
- Details of the registered valuer
- Upload of valuation report
The form also permits reporting of multiple capital assets, with aggregate reporting of the attributed amount.
Valuation Report is Mandatory
One of the most important requirements under Rule 50 is the mandatory valuation of capital assets .
The attribution of income must be supported by a valuation report issued by a registered valuer, and a copy of the report has to be uploaded while filing Form No. 27.
This makes professional valuation a critical part of compliance for affected entities.
Can Form No. 27 Be Filed Offline?
No. The government has clarified that Form No. 27 can only be furnished electronically .
Taxpayers and professionals must therefore complete the filing process through the prescribed electronic mode.
Is Revision of Form No. 27 Allowed?
At present, revision of Form No. 27 may not be permitted, unless specifically enabled through the electronic filing system.
Therefore, taxpayers are advised to verify all details carefully before submission to avoid errors.
Consequences of Non-Filing or Incorrect Filing
Non-compliance or inaccurate filing of Form No. 27 may lead to:
- Disputes in capital gains computation
- Denial of deductions under Section 72(5)
- Possible proceedings under the Income-tax Act
Given the tax implications, experts advise businesses undergoing restructuring to assess compliance requirements at an early stage.
Why Form No. 27 Matters
Form No. 27 is expected to play a key role in ensuring proper implementation of Rule 50 under the new Income-tax framework.
By requiring valuation-backed attribution of income, the form seeks to improve transparency, strengthen tax certainty, and minimise future litigation arising out of dissolution and reconstitution of business entities.
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