Professional Valuation Services for Tax & Business

Rule 11UA of Income Tax Rules prescribes the methodology for determining Fair Market Value (FMV) of unquoted equity shares. It's required when: (1) Issuing shares at premium to avoid Angel Tax under Section 56(2)(viib), (2) Transferring shares to compute capital gains under Section 50CA, (3) Receiving shares as gift or below FMV under Section 56(2)(x). The rule provides for NAV Method (can be done by CA) and DCF Method (requires Merchant Banker).

Property valuation is required: (1) To determine FMV as on 01-04-2001 for computing indexed cost of acquisition when property was acquired before April 2001, (2) Under Section 50C when you want to challenge stamp duty value that exceeds your actual sale consideration by more than 10%, (3) When property is received as gift under Section 56(2)(x), (4) When Assessing Officer refers the matter to Valuation Officer under Section 55A.

It depends on the asset and purpose: (1) Property/Land/Building - IBBI Registered Valuer in 'Land & Building' category, (2) Equity Shares (NAV Method) - Chartered Accountant or IBBI Registered Valuer in 'Securities or Financial Assets', (3) Equity Shares (DCF Method) - SEBI Registered Merchant Banker, (4) Business Valuation - IBBI Registered Valuer in 'Securities or Financial Assets', (5) Plant & Machinery - IBBI Registered Valuer in 'Plant & Machinery'.

The validity depends on the purpose: (1) For share issuance under Rule 11UA - 90 days from the date of report, (2) For property valuation - generally valid as on the valuation date, no expiry but should be close to transaction date, (3) For Companies Act compliances - as specified in the relevant rules, typically 6 months. Always get fresh valuation if significant time has passed or material changes have occurred.

Angel Tax under Section 56(2)(viib) applies when a company issues shares at a premium exceeding FMV. The excess amount is taxed as 'Income from Other Sources'. To avoid: (1) Get proper valuation report before issuing shares, (2) Use safe harbour - issue price up to 110% of FMV is acceptable, (3) Startups registered with DPIIT get exemption if total paid-up capital + premium is less than ₹25 crore. From April 2024, this applies to both resident and non-resident investors.

NAV (Net Asset Value) Method values shares based on book value of assets minus liabilities from balance sheet. It's backward-looking and works for asset-heavy companies. DCF (Discounted Cash Flow) Method values shares based on present value of projected future cash flows. It's forward-looking and works for growth companies, startups. NAV is simpler and can be done by CA, while DCF requires SEBI Merchant Banker and is more suitable when future potential is higher than current assets.

Section 50B applies when a business undertaking is sold as a going concern for a lump sum (slump sale). Capital gains = Sale consideration - Net Worth of undertaking. Net worth is computed as per Rule 11UAE - book value of assets less liabilities as appearing in books. The computation must be certified by a CA in Form 3CEA. Note: Fair value adjustment is required for certain assets like land, building, jewellery, shares etc.

Yes, you can challenge the Departmental Valuation Officer's (DVO) report. The DVO's valuation is not binding on the taxpayer. You can: (1) Submit your own Registered Valuer's report with detailed reasoning, (2) Point out errors in methodology or assumptions used by DVO, (3) Appeal before CIT(A) if assessment is done based on DVO report, (4) Further appeal to ITAT, High Court. Courts have held that AO cannot blindly accept DVO report without giving opportunity to assessee.