ACQUIREMANThree ways to sell a business in India
| Share sale | Slump sale (business transfer) | Itemised asset sale | |
|---|---|---|---|
| Who sells? | Shareholders | The company | The company |
| What is sold? | Shares of the company | An undertaking as a going concern, for a lump sum | Specific assets, each with its own price |
| Main document | Share Purchase Agreement (SPA) | Business Transfer Agreement (BTA) | Asset Purchase Agreement (APA) |
| Liabilities | Stay with the company (buyer inherits them indirectly) | Transfer with the undertaking, as agreed | Stay with the seller unless specifically assumed |
| Who pays tax on the gain? | Selling shareholders | The company | The company |
| Contracts and licences | Stay with the company (check change-of-control clauses) | Must be assigned or novated | Must be assigned or novated |
| Employees | Continue automatically | Transfer with the business, usually with continuity | Must be re-hired by the buyer |
Share sale
The buyer acquires the shares of the company from its shareholders, so the company — with its contracts, licences, employees, history and liabilities — changes owner.
Why buyers and sellers like it
- One transaction transfers the whole business.
- Contracts, licences and registrations usually stay in place.
- Shareholders receive the proceeds directly and pay capital gains tax.
What to watch
- The buyer inherits every past liability of the company, so it will ask for wide warranties, indemnities and sometimes escrow.
- Tax losses may lapse. For closely held companies, accumulated tax losses generally cannot be carried forward if more than 49% of voting power changes hands (section 79), with limited relief for eligible startups.
- Fair value rules. For unlisted shares, if the price is below fair market value, the shortfall can be taxed — in the seller’s hands as deemed consideration (section 50CA) and in the buyer’s hands as income (section 56(2)(x)).
- Capital gains for sellers. For resident individuals, unlisted shares held for more than 24 months generally qualify for long-term capital gains at 12.5% (plus surcharge and cess); shorter holdings are taxed at slab rates.
- Investor rights (ROFR, tag-along, drag-along) and any foreign-investment rules must be followed.
Slump sale (business transfer)
A slump sale is the transfer of one or more undertakings by a company, as a going concern, for a lump-sum price without assigning values to individual assets and liabilities. It is governed for tax purposes by section 50B of the Income-tax Act.
Why it is used
- The seller can carve out one business division and keep others.
- The buyer gets an operating business without taking over the whole legal entity and its unrelated history.
What to watch
- The gain is taxed in the company’s hands. If the undertaking has been held for more than 36 months, the gain is generally long-term.
- Fair market value rules apply to the deemed sale consideration.
- Contracts, licences and permits must be transferred or re-obtained.
- Transfer of a business as a going concern is generally exempt from GST, but structure and documentation must support that position.
- Stamp duty can apply to the transfer of immovable property and some other assets, and varies by state.
- Getting money from the company to its shareholders afterwards (by dividend, buyback or capital reduction) has its own tax cost.
Itemised asset sale
Each asset — IP, code, domain names, equipment, customer contracts — is sold separately at its own price.
When it makes sense
- The buyer wants only certain assets (for example, a product, brand or codebase).
- The company has liabilities or history the buyer does not want to take on.
- In distressed situations.
What to watch
- Each asset is taxed separately, and GST may apply to the transfer of some assets.
- Employees must be offered new employment by the buyer; check obligations under labour laws.
- More documentation and third-party consents are needed.
Mergers and amalgamations
A fourth route is a court- or tribunal-approved scheme of merger or amalgamation under sections 230–232 of the Companies Act, 2013, or the simpler fast-track merger route under section 233. In September 2025 the fast-track route was widened to cover more cases, including certain unlisted companies with limited borrowings and some group mergers. Mergers that meet the conditions in the Income-tax Act can be tax-neutral, but they take longer and require NCLT or Regional Director approval.
Which structure should you choose?
| If… | Consider… |
|---|---|
| You are selling the entire company and it is clean | Share sale |
| You are selling one division and keeping the rest | Slump sale |
| The buyer only wants IP, code or a brand | Asset sale |
| Two group companies are combining | Merger or fast-track merger |
| The buyer is foreign | Share sale or slump sale, structured around FEMA rules — see cross-border M&A |
Next steps
Start with our guide to selling a startup in India, or book a consultation with Acquireman to discuss the right structure for your deal.
Frequently asked questions
What is the difference between a share sale and an asset sale?
In a share sale, shareholders sell their shares and the company changes owner with all its assets and liabilities. In an asset sale, the company sells specific assets, and liabilities stay with the seller unless the buyer agrees to take them.
What is a slump sale in India?
A slump sale is the transfer of a business undertaking as a going concern for a lump-sum price, without assigning values to individual assets and liabilities. It is taxed under section 50B of the Income-tax Act.
Which structure do buyers prefer?
Buyers often prefer asset or slump sales to avoid inheriting unknown liabilities, while sellers often prefer share sales for simplicity and direct proceeds. The final choice depends on tax, liabilities, approvals and what is being sold.
Do tax losses survive a share sale?
Not always. For closely held companies, carried-forward business losses generally lapse if more than 49% of voting power changes, with limited relief for eligible startups. Take tax advice before relying on losses in the valuation.
This article is general information for educational purposes, current as of 11 October 2026. It is not legal, tax, financial or investment advice. Laws, regulations and market conditions change — consult qualified professionals before acting. Acquireman is a marketplace and advisory platform; see our Terms of Use.