Rule 54 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 54 of the Income-tax Rules, 2026 requires an accountant's report in Form No. 28 for every slump sale under section 77(4); rule 55 fixes the Valuation Officer reference thresholds at 15% and ten lakh rupees.
Rule 54 — the slump sale report
The rule is a single sentence: "In case of a slump sale under section 77(4), every assessee is required to submit a report from an accountant as defined in section 515(3)(b), in Form No. 28 before the specified date referred to in section 63." The 1962 parallel is rule 6H.
| Element | Detail |
|---|---|
| Trigger | A slump sale under section 77(4) |
| Who | Every assessee — no class is excluded |
| By whom | An accountant as defined in section 515(3)(b) |
| Form | Form No. 28 |
| When | Before the specified date referred to in section 63 |
Rule 54 borrows the specified date referred to in section 63 — the tax audit date — as its own deadline, but it does not make the report conditional on a tax audit being required. An assessee below every audit threshold that effects a slump sale must still obtain and submit Form No. 28 by that date. The same borrowing appears in rule 66 for the Form No. 32 audit report.
Two practical consequences follow. First, the valuation work behind the report has to be complete well before the return, because the report precedes it. Second, since a slump sale usually settles in the middle of a year, the accountant is reporting on a transaction whose accounting treatment may still be open — which is why the supporting net worth computation should be fixed at the time of the transaction rather than at the year end.
Rule 55 — the Valuation Officer thresholds
The whole rule: for the purposes of section 91(1)(b)(i):
- the percentage of the value of the asset shall be 15%; and
- the amount shall be ten lakh rupees.
The 1962 parallel is rule 111AA. Rule 55 does no more than supply the two numbers that section 91(1)(b) leaves to be prescribed — the proportionate threshold and the absolute one. Both are read together with the section's own conditions for making a reference to a Valuation Officer.
Rule 55 states 15% and ten lakh rupees without saying whether they operate cumulatively or in the alternative — that is settled by the wording of section 91(1)(b)(i) itself. Reading the rule alone is not enough to work out when a reference may be made; the rule only fills the blanks the section leaves.
Where the two rules sit
Both belong to the valuation machinery around capital gains. Rule 54 requires a professional report on a slump sale, where the consideration is a lump sum and the net worth computation is the entire dispute. Rule 55 sets the point at which the department may bring in a Valuation Officer to test a value. Alongside them sit rule 53, which computes fair market value of capital assets for section 77, and rules 56 and 57, which define the terms and set the method of determining fair market value generally.
| Rule | Function |
|---|---|
| 53 | Computation of fair market value of capital assets for section 77 |
| 54 | Accountant's report on the slump sale, in Form No. 28 |
| 55 | Thresholds for a reference to a Valuation Officer |
| 56 and 57 | Definitions and the method of determining fair market value |
Worked example
| Facts | Position |
|---|---|
| LLP transfers a division as a going concern for a lump sum in August | Slump sale; Form No. 28 required |
| LLP is below every audit threshold | Still required — rule 54 says every assessee |
| Return due 31 October; specified date under section 63 the same | Form No. 28 before that date |
| Net worth computation prepared at the year end | Too late to support a report due earlier — fix it at the transaction date |
| Report signed by a person outside section 515(3)(b) | Not a valid report |
| Department considers a Valuation Officer reference | Thresholds of 15% and ten lakh rupees from rule 55 apply as section 91(1)(b)(i) provides |
Compliance checklist
- Identify a slump sale under section 77(4) as soon as it is contemplated.
- Fix the net worth computation at the transaction date.
- Engage an accountant under section 515(3)(b).
- Submit Form No. 28 before the section 63 specified date, whether or not a tax audit applies.
- Keep the fair market value working under rules 53, 56 and 57 with the report.
- Note the 15% and ten lakh rupee thresholds in rule 55 when assessing valuation risk.
- Read those thresholds together with section 91(1)(b)(i) itself.
Common mistakes
- Assuming Form No. 28 is due with the return rather than before the specified date.
- Treating the report as unnecessary where no tax audit applies.
- Computing net worth at the year end.
- Reading rule 55 in isolation from section 91(1)(b)(i).
- Using a valuer's certificate in place of the accountant's report.