Share Valuation Report
A share valuation report fixes a fair value for the shares of an unlisted company. You need one to allot shares on a preferential basis, to sell or transfer shares without a tax surprise, and to deal with a foreign investor. Each law asks for a different method and a different signatory, and we match the report to the purpose.
What it is
A share valuation report is a signed opinion on what one share of a company is worth on a given date. It explains the purpose, the method used, the figures relied on and the final value per share. Listed shares have a market price. Unlisted shares do not, so the law asks for a valuation whenever the price matters to tax, to other shareholders or to foreign exchange rules.
Three laws ask for it, each in its own way. The Companies Act, 2013 requires a registered valuer under Section 247. The Income-tax Act, 2025 uses the fair market value worked out under Rule 57 of the Income-tax Rules, 2026, which replaced Rule 11UA from 1 April 2026. And FEMA’s Non-Debt Instruments Rules, 2019 set a fair-value floor or ceiling when shares move between residents and non-residents.
Who it applies to
Companies issuing new shares
A preferential allotment, shares issued for something other than cash, or sweat equity. The Share Capital Rules want a registered valuer’s report to fix the price.
Shareholders selling or receiving shares
Anyone doing a share transfer in an unlisted company. Income tax compares the price with the fair market value under Rule 57, on both the seller’s and the buyer’s side.
Companies with foreign investors
Issues or transfers involving a non-resident, including an NRI relative. FEMA pricing rules apply, and the fair value must be certified by a qualified professional.
Why it matters
Protects the price you agreed
A price backed by a proper report is far easier to defend in an income-tax scrutiny than a number picked over the phone.
Keeps the allotment valid
Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014 says the price of a preferential issue is determined on the basis of a registered valuer’s report. Skip it and the allotment itself is out of line with the Rules.
Lets foreign money come in cleanly
FC-GPR and FC-TRS reporting needs the fair value certificate. A missing or wrong one holds up the filing and the bank’s processing.
Documents required
Financial information
- Audited balance sheet and profit and loss account, latest year
- Provisional accounts up to the valuation date, if later
- Projections for the next few years (for DCF)
- Fixed asset and investment details
Company records
- Certificate of incorporation, MOA and AOA
- Latest shareholding pattern
- Board resolution appointing the valuer
- Any shareholders’ agreement or term sheet
Asset-specific support
- Valuation of land or buildings held, where relevant
- Statement of quoted and unquoted investments held
- Details of the proposed deal: buyer, number of shares, date
Which report, which signatory
| Purpose | Law | Usual method | Who can sign |
|---|---|---|---|
| Preferential allotment, non-cash consideration, sweat equity | Companies Act, Section 247; Share Capital Rules 8 and 13 | Any accepted method the valuer justifies, often DCF or NAV | Registered valuer (IBBI, Securities or Financial Assets class) |
| Transfer of unquoted equity shares (income tax) | Income-tax Act, 2025, Sections 79 and 92(2)(m); Rule 57 | Prescribed net asset value formula | Formula set by the rule; we prepare and certify the working |
| Issue or transfer with a non-resident | FEMA NDI Rules, Rule 21 | Internationally accepted pricing method on arm’s length basis, commonly DCF | Chartered accountant, SEBI-registered merchant banker, or practising cost accountant |
NAV or DCF? Net asset value looks backwards. It takes what the company owns, minus what it owes, and divides by the shares. Rule 57 uses this approach: (A+B+C+D−L) × (PV/PE), where land, jewellery and securities come in at fair market value and other assets at book value. Discounted cash flow looks forward. It values the cash the business is expected to earn and suits a growing company with few assets on its books.
Here is the catch. One deal can trigger two laws at once. A share sold by a resident to a non-resident needs a FEMA fair value, and the seller must also watch the Rule 57 value for income tax. We plan both reports together so the numbers do not contradict each other.
Take a Faridabad auto-parts maker whose founder’s cousin in Dubai wants to buy in. The cousin is a non-resident, so the issue price cannot go below the FEMA fair value. If the company has no room left in its share capital, it must also increase its authorised capital before allotting. In practice, we line up the valuation, the capital increase and the FC-GPR as one plan.
How it works
Tell us the purpose and the deal date
We ask what the report is for. That single answer decides the law, the method and who has to sign.
Share your accounts and projections
We gather audited figures, current-year numbers and, for DCF, your business plan. Then we test the plan against what the company actually achieved in past years. A forecast that doubles sales every year needs a reason.
Value the shares, then cross-check
We apply the required method and, where useful, a second method as a sense check. Big gaps between the two get explained in the report.
Sign and issue the report
The report states the purpose, valuation date, sources, method and caveats. Where the law needs a registered valuer or a merchant banker, the report is signed by one.
Complete the resolutions and filings
We draft the board and shareholder resolutions, the share transfer deed or allotment papers, and the FEMA reporting where needed.
Timelines
Value on the date of the deal
Rule 57 values shares on the valuation date, normally the date of the transfer. A report dated well before the deal may not fit it.
Get it before the price is fixed
For a preferential issue, the registered valuer’s report comes first. The price you put to shareholders is based on it.
FC-GPR in 30 days, FC-TRS in 60
FEMA reporting runs on a clock: FC-GPR within 30 days of allotment, FC-TRS within 60 days of transfer or receipt of funds, whichever is earlier.
What happens if the value is wrong or missing
Seller taxed on the higher value
Under Section 79 of the Income-tax Act, 2025 (old Section 50CA), if unquoted shares are sold below fair market value, that value is taken as the sale price for capital gains.
Buyer taxed on the shortfall
Section 92(2)(m) taxes the buyer on the gap between fair market value and the price paid, where the gap is more than ₹50,000. If a father gifts shares to his daughter, she is not taxed: gifts from relatives are exempt.
Valuer held to account
Section 247(3) makes a valuer who breaks the rules liable to a ₹50,000 penalty, and one acting to defraud to up to one year’s jail and a fine of ₹1 lakh to ₹5 lakh.
Frequently asked questions
Who can sign a share valuation report?
It depends on the purpose. For allotments under the Companies Act, Section 247 requires a registered valuer registered with IBBI in the Securities or Financial Assets class. For FEMA pricing, Rule 21 of the NDI Rules accepts a chartered accountant, a SEBI-registered merchant banker or a practising cost accountant. For income tax on share transfers, Rule 57 sets a fixed formula. Tell us the purpose and we arrange the right signatory.
Is Rule 11UA still used for share valuation?
Not for transactions from 1 April 2026. Rule 57 of the Income-tax Rules, 2026 replaced Rules 11UA, 11UAA and 11UAB when the Income-tax Act, 2025 took effect. The net asset value formula for unquoted equity shares is largely the same, so the change is mostly one of rule numbers. Older transactions are still checked under Rule 11UA, and we can work under either.
How is the fair market value of unquoted shares calculated for income tax?
Rule 57 uses a net asset value formula: (A+B+C+D−L) × (PV/PE). Land and buildings, jewellery and artwork, and securities are taken at fair market value. Other assets are at book value, and liabilities are deducted. The result is spread over the paid-up equity capital. With a final balance sheet, the working is quick to prepare and easy to check.
Do I need a registered valuer for a preferential allotment?
Yes. Rule 13(2) of the Companies (Share Capital and Debentures) Rules, 2014 says the price of shares issued on a preferential basis, for cash or otherwise, is determined on the basis of a registered valuer’s report. Non-cash consideration must also be valued by a registered valuer. We arrange the report before the resolutions are drafted, so the price is settled from the start.
Is a valuation report needed for a simple share transfer?
Company law does not need one to register an ordinary share transfer. Income tax still applies, though. If unquoted shares change hands below fair market value under Rule 57, the seller and buyer can both be taxed. A short valuation note on file is cheap insurance against that, and it makes the transfer easy to explain later.
What valuation is needed when an NRI invests in my company?
Under Rule 21 of the FEMA NDI Rules, an unlisted company cannot issue shares to a non-resident below fair value. The fair value must use an internationally accepted pricing method on an arm’s length basis, certified by a CA, a SEBI-registered merchant banker or a practising cost accountant. Form FC-GPR then goes in within 30 days of allotment. We handle both steps.
Which is better, NAV or DCF?
The purpose decides. Rule 57 prescribes net asset value for income-tax fair market value on transfers. DCF suits a growing business whose worth lies in future cash flows rather than assets, and it is often used for FEMA pricing and fund-raising. A registered valuer may use more than one method and explain the weighting. We recommend the one your purpose needs.
Does a startup still face angel tax on share premium?
No. Section 56(2)(viib) of the Income-tax Act, 1961, known as angel tax, does not apply from 1 April 2025 under the Finance Act, 2024. Share premium from resident investors is no longer taxed under that provision. You still need a registered valuer’s report for a preferential allotment, and FEMA pricing for foreign investors, so the valuation step remains.
Is there a government fee for a share valuation report?
No. A valuation report is not filed with the government on its own, so there is no government fee for it. It is attached to or relied on for other filings, such as the allotment return or FEMA reports, which have their own fees. Our quote shows our fee and any government fee separately, so there are no surprises. For the tax side of a bigger deal, our tax planning team can review it too.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
The valuation report itself carries no government fee. Filings that follow it, such as the return of allotment or FEMA reporting, have their own fees where applicable.
Ready to begin?
Tell us why you need the valuation, and we will tell you the method, the signatory and the timeline.