Rule 57 — Determination of fair market value. Made under s.26, s.72, s.92 of the Income-tax Act, 2025.
Rule 57 gives effect to Section 26, Section 72 and Section 92 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
The rule is a single Table. For the sections listed in column B, the fair market value of property of the nature in column C is to be determined in the manner in column D.
Entry 1 (jewellery, for sections 26(2)(j) and 92) gives three routes: the price the jewellery would fetch if sold in the open market on the valuation date; or, if it is received by way of purchase from a registered dealer on the valuation date, the invoice value; or, if it is received by any other mode and its value exceeds Rs. 50,000, the assessee may obtain a report from a registered valuer on the price it would fetch if sold in the open market on the valuation date. Entry 2 applies the same three routes to archaeological collections, drawings, paintings, sculptures or any work of art, together called artistic work.
Entry 3 covers quoted shares and securities. Where they are received by way of a transaction carried out through a recognised stock exchange, fair market value is the transaction value as recorded in that stock exchange. Where the transaction is carried out otherwise than through a recognised stock exchange, it is the lowest price of those shares and securities quoted on any recognised stock exchange on the valuation date; and where there is no trading on the valuation date on any recognised stock exchange, the lowest price on any recognised stock exchange on a date immediately preceding the valuation date when they were traded.
Entry 4 covers unquoted equity shares, for sections 26(2)(j), 72 and 92, and gives a formula: fair market value = (A + B + C + D – L) × (pv)/(PE). A is the book value of all assets in the balance sheet other than jewellery, artistic work, shares, securities and immovable property, reduced by income-tax paid less income-tax refund claimed, and by any amount shown as an asset, including the unamortised amount of deferred expenditure, which does not represent the value of any asset. B is the price jewellery and artistic work would fetch in the open market on the basis of a registered valuer's report. C is the fair market value of shares and securities determined in the manner provided in this rule. D is the value adopted or assessed or assessable by any Government authority for stamp duty on the immovable property. L is the book value of liabilities in the balance sheet, excluding six items: paid-up equity capital; amounts set apart for dividends on preference and equity shares not declared before the date of transfer at a general body meeting; reserves and surplus by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation; provision for taxation other than income-tax paid less refund claimed, to the extent of the excess over the tax payable with reference to book profits; provisions for meeting liabilities other than ascertained liabilities; and contingent liabilities other than arrears of dividends payable on cumulative preference shares. Pv is the paid-up value of the equity shares being valued and PE is the total paid-up equity share capital as shown in the balance sheet.
Entry 5 covers unquoted shares and securities other than equity shares which are not listed on any recognised stock exchange: the price they would fetch if sold in the open market on the valuation date, and the assessee may obtain a report from a merchant banker or an accountant on that valuation. Entry 6 covers immovable property being land or building or both, for section 26(2)(j): the value adopted or assessed or assessable by any authority of the Central Government or a State Government for stamp duty on the valuation date. Entry 7 is the residual entry for any other property: the price it would ordinarily fetch on sale in the open market on the valuation date.
Sections 26(2)(j), 72 and 92 all turn on the fair market value of property, and none of them says how that value is to be arrived at. This rule supplies the method, and does so differently for each class of property — a market price for things that have a market, a stamp duty value for land and buildings, an exchange-recorded price for quoted shares, and a book-value formula adjusted to market for unquoted equity shares, where no market price exists at all.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Value above which a registered valuer's report may be obtained for jewellery | Rs. 50,000 | Where the jewellery is received by a mode other than open market sale or purchase from a registered dealer; the report is an option the assessee may take, not a requirement | Table Sl. No. 1(c) |
| Value above which a registered valuer's report may be obtained for artistic work | Rs. 50,000 | Where the artistic work is received through a means other than open market sale or purchase from a registered dealer; the report is an option the assessee may take | Table Sl. No. 2(c) |
| Fair market value of unquoted equity shares | (A + B + C + D – L) × (pv)/(PE) | A, B, C, D, L, pv and PE as defined in the entry; applies for sections 26(2)(j), 72 and 92 | Table Sl. No. 4 |
| Quoted shares and securities transacted on a recognised stock exchange | The transaction value as recorded in such stock exchange | Where the shares and securities are received by way of a transaction carried out through a recognised stock exchange | Table Sl. No. 3(a) |
| Quoted shares and securities transacted off-exchange | The lowest price quoted on any recognised stock exchange on the valuation date | Where the transaction is carried out other than through a recognised stock exchange; if there was no trading on that date, the lowest price on any recognised stock exchange on the immediately preceding date on which they were traded | Table Sl. No. 3(b) |
| Immovable property being land or building or both | The stamp duty value adopted or assessed or assessable on the valuation date | Value adopted, assessed or assessable by any authority of the Central Government or a State Government; for section 26(2)(j) | Table Sl. No. 6 |
The columns matter as much as the method: entries 4 and 5 are available for sections 26(2)(j), 72 and 92, while entries 6 and 7 are given only for section 26(2)(j), so the Table is not one uniform code of valuation across every provision that uses the phrase. In the unquoted equity formula, book value is the starting point but four classes of asset are pulled out of A and brought back at market — jewellery and artistic work at a registered valuer's price, shares and securities by the manner in this rule, and immovable property at its stamp duty value — so the exercise cannot be done from the balance sheet alone. The exclusions from L are what make the formula work: paid-up equity capital and reserves and surplus are shareholders' funds and are not deducted as liabilities, and unascertained and contingent liabilities are not deducted either, with the express direction that reserves and surplus are excluded even if the resulting figure is negative. The registered valuer report in entries 1 and 2 is permissive — the rule says the assessee "may" obtain it — and the Rs. 50,000 line is a condition for taking that option, not a threshold below which no value need be found.
A company's balance sheet shows assets of Rs. 5 crore, of which a painting stands at a book value of Rs. 20 lakh and land at Rs. 1 crore. A registered valuer puts the painting at Rs. 60 lakh, and the stamp duty value of the land is Rs. 2.5 crore. A is therefore Rs. 3.8 crore, B is Rs. 60 lakh and D is Rs. 2.5 crore. If liabilities after excluding paid-up equity capital, reserves and surplus and unascertained provisions come to Rs. 1.9 crore, the net figure is Rs. 5 crore, and a holder of shares of paid-up value Rs. 10 lakh out of a total paid-up equity capital of Rs. 50 lakh takes one-fifth of it — a fair market value of Rs. 1 crore.
A reader meets it whenever a receipt or a transfer has to be valued for a return or an assessment — a gift or an inadequate-consideration receipt tested under section 26(2)(j), or a computation under section 72 or section 92 — and in the registered valuer's, merchant banker's or accountant's report obtained to support that figure.
Fair market value of unquoted equity shares = (A + B + C + D – L) × (PV)/(PE)
the lowest price of such shares and securities quoted on any recognised stock exchange on the valuation date
The price that such property would ordinarily fetch on sale in the open market on the valuation date.