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Tax & Global Structuring Advisory · Transaction Tax Architecture & Strategic M&A Structuring

Slump Sale vs Share Sale Structuring Analysis.

The same business changes hands at a very different after-tax number depending on whether shares move or the undertaking does.

A foreign acquirer or its India counsel reaching an agreed price for an Indian target has, at that point, decided almost nothing about what the deal will actually cost. Whether the transaction is framed as a purchase of shares or as a slump sale of the business undertaking changes the capital-gains charge, the basis the buyer inherits, the stamp duty, and where the target’s historic tax exposure lands.

The choice is frequently made by reflex — shares because they are clean, a business transfer because someone flagged a liability — and the tax consequence is discovered afterward rather than designed. This page sets out how the firm decides between the two modes so the form serves the after-tax outcome, not the other way round.

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The Framework

How We Decide Between the Two Modes.

The firm does not treat the share-sale-versus-slump-sale question as a documentation choice to be settled once price is agreed. It is the decision that fixes what each side keeps after tax, and it is governed by two different parts of the Income Tax Act that produce materially different results on the same deal.

A share sale transfers the company with its entire history intact — including its tax history. A slump sale under Section 50B transfers the business undertaking as a going concern for a lump-sum consideration, leaving the selling entity, and its legacy exposure, behind. We assess every transaction against where that history should sit, what basis the buyer needs, and what the structure costs in tax and duty before the form is chosen.

  • What transfers Whether the deal moves the company itself (shares, with all history attached) or the business as an undertaking (a slump sale that leaves the selling entity behind).
  • Gains character How the gain is computed and taxed in each mode — capital gains on shares for the seller, versus the Section 50B computation on a slump sale of the undertaking.
  • Inherited exposure Where the target’s unprovided and contingent tax liability lands after closing, which differs sharply between acquiring the company and acquiring its business.
  • Basis & duty What depreciable basis the buyer acquires going forward, and the stamp-duty cost the chosen form attracts on the transfer.
The Analysis

The Two Modes, Compared on What Each Side Keeps.

The decision is not which mode is simpler to paper, but which one delivers the after-tax position each party is actually negotiating for. The comparison that decides it in practice is set out below.

01

Slump Sale vs Share Sale — the Structural Trade-Off

In a share sale, the seller is taxed on capital gains on the shares, and where the seller is a non-resident the rate, holding-period treatment, and any treaty relief turn on residence and the nature of the shares. The buyer acquires the company whole — its assets at their existing tax-written-down values, and its tax history with them. There is no step-up in the depreciable base, and any unprovided demand, withholding default, or open assessment travels into the buyer’s entity unless it is contractually ring-fenced.

In a slump sale under Section 50B, the seller transfers the business undertaking as a going concern for a single lump-sum consideration, and the gain is computed against the net worth of the undertaking rather than asset-by-asset. The legacy entity — and the tax exposure that sits inside it — stays with the seller. For a buyer carrying real concern about the target’s history, that isolation is often worth more than the simplicity of a share deal.

The basis consequence then runs the other way. A slump sale lets the buyer carry the acquired assets at their allocated values, supporting depreciation going forward, where a share sale leaves the buyer with the company’s existing base. Set against that, a slump sale attracts stamp duty on the transfer of the underlying assets and is operationally heavier — contracts, licences, and employees move with the undertaking rather than staying put inside an unchanged company.

The decision therefore resolves into a small number of structural questions rather than a default preference: how material the target’s tax history is, whether the buyer needs a stepped-up base, what stamp and transfer friction the business assets attract, and how the seller’s own gain is taxed in each mode. Where the seller is exiting and the gains computation and any treaty access drive the seller’s decision, that analysis is governed by the firm’s exit tax and capital gains structuring practice; this page addresses the mode decision, not the seller’s exit computation in isolation.

Structural Implications

What the Mode Sets in Motion.

The transaction mode decides far more than the tax line on the deal; it shapes the entity each side is left holding.

01

After-Tax Price

The mode fixes the seller’s gains computation and the buyer’s basis, so the same headline price resolves to a different net outcome for each side depending on the form chosen.

02

Where Risk Lands

A share sale carries the target’s tax history into the buyer’s entity, while a slump sale leaves it with the seller — making the mode a risk-allocation decision as much as a pricing one.

03

Operational Drag

A slump sale moves contracts, licences, and employees with the undertaking and attracts stamp duty on the assets, where a share sale leaves the operating company undisturbed.