Willing
Rules out a distress saleWhere the seller's need drags the price below what the asset is worth.
Net Worth & Solvency Glossary · Net Worth Mechanics
Fair Market Value (FMV) and the Assets a CA Will Certify
noun · abbreviated FMV · an opinion supported by evidence, never a figure read off a document
Definition
Fair market value (FMV) is the price an asset would fetch in a sale between a willing buyer and a willing seller, both reasonably informed and neither forced to transact.
In finance, FMV stands for "fair market value". Because no such sale has actually taken place, FMV is always an opinion supported by evidence, not a fact read off a document.
One asset, three values on one date
Each figure answers a different question
- 1Fair market valueWhat a willing, informed buyer would pay a willing seller. The figure this entry defines.
- 2The notified rateThe state's figure for stamp duty on a property. An administrative number, not a market price.
- 3The lender's figureThe lower amount a lender expects to recover in a quick sale, worked out on its own valuation.
A certificate says which of these it reports, and on what evidence. The basis sits beside the value, not behind it.
Meaning
01What makes a value "fair" between willing parties
Each part of the definition rules something out.
Reasonably informed
Rules out a bargain from ignoranceA price struck because one side did not know something material.
Not forced
Rules out a forced auctionWhere the deadline rather than the asset sets the price.
The result is a hypothetical price, not an observed one. Two competent professionals can reach different figures for the same asset without either being careless. What separates a defensible value from a careless one is the evidence recorded behind it.
FMV in income tax
Tax law uses fair market value for several purposes, with its own computation rules. The Income-tax Act, 2025 applies from 1 April 2026, for tax year 2026-27 onwards. The Income-tax Rules 2026 prescribe methods for valuing unquoted shares and certain other assets.
Rule 57 of the Income-tax Rules, 2026 (formerly Rule 11UA) values unquoted shares by the net asset value method. Section 2(44) of the Income-tax Act, 2025 (formerly section 2(22B) of the Income-tax Act, 1961) defines the fair market value of a capital asset as the price it would ordinarily fetch on sale in the open market on the relevant date or, where that price cannot be ascertained, the price determined in the prescribed manner.
These tax methods are built for tax provisions. They do not automatically govern what a lender or tender authority accepts. FMV under the tax rules in depth is covered in a separate article.
On a certificate
02Valuation evidence required before an asset is stated at FMV
Because FMV is an opinion, the evidence behind it is what makes it defensible. The evidence depends on the asset.
- Listed shares and securitiesThe quoted price on a stated date
This is as close to certainty as valuation gets.
Observed price - Land and buildingsComparable sales, the notified rate, a valuer's report
Comparable sales in the same area, the government's notified rate for the area and, where the amount justifies it, a registered valuer's report.
Several sources - Unlisted sharesAudited accounts and a named method
The company's audited accounts and a named valuation method.
Accounts plus method - An owner's own estimateNot evidence
A figure with nothing recorded behind it is the entry a reader discounts first.
Excluded
A certificate states the basis alongside every value. The basis is not supporting detail; it is the substance of what is being certified. A value with no visible reasoning is the entry a reader discounts first, usually by substituting a more cautious assumption of their own.
Where a stand-alone valuation is needed, a fair market value certificate is a separate engagement. Whether a reader wants a valuation certificate or net worth certificate is compared in its own article.
Three sources, three weights
03Registered valuer reports, circle rates and broker quotes: what carries weight in India
The three common sources of value for property carry very different weight and are not interchangeable.
- 1Strongest
A registered valuer's report
It is required for some statutory purposes, and a lender's own panel valuer will be compared with it. Registered valuers work under section 247 of the Companies Act, 2013 and the Companies (Registered Valuers and Valuation) Rules, 2017, in force from 18 October 2017, and are registered with the Insolvency and Bankruptcy Board of India in three asset classes: land and building, plant and machinery, and securities or financial assets.
- 2A floor, not a valuation
The circle rate
Called the ready reckoner rate in Maharashtra and the jantri rate in Gujarat, it is a government-notified value used mainly for stamp duty, not a market price. It can sit well below what a property would fetch, or sometimes above it. Using it as a valuation without saying so misleads either way.
- 3Weakest
A broker's quote
It reflects an asking price, not a completed sale, so it is used to support a figure, not to set one.
Where two sources conflict, the certificate names both and explains which was preferred. Quietly choosing the higher one is how a valuation loses its credibility.
Written by Subham Jhunjhunwala · Reviewed by CA Sundram Gupta
Sources: Income Tax Department, the Income-tax Act 2025 in force from 1 April 2026 (incometaxindia.gov.in). This entry describes Indian practice in general terms and is not a valuation of any asset.
Need help with a certificate that uses fair market value? See our Certificate of Fair Market Value.A stand-alone valuation engagement that records the evidence behind the figure.