Business and Share Valuation in India: Who Signs What, and When (2026)

When a valuation is required

A valuation is event-driven, not calendar-driven. You need a fresh report each time a trigger occurs, and the common ones are:

• A funding round or preferential allotment of shares under Section 42 of the Companies Act.
• A share transfer, especially between a resident and a non-resident (FEMA pricing).
• ESOP grants, to fix the perquisite value.
• Mergers, demergers, buybacks and sweat equity issuance.
• Tax events, any transfer of unquoted shares triggers a fair market value computation.

Each of these sits under a different law, and that is where most of the difficulty starts.

The core trap: who signs what

This is the single most common reason valuation reports get rejected in diligence or tax scrutiny. Think of it as three separate licences for three separate laws:

Why one report is not universal

It is tempting to get one valuation and reuse it everywhere. That is a reliable way to attract notices. Each framework has its own definition of value, its own accepted methods, and its own signatory:

• A DCF-based fair value valid for FEMA may fail the Rule 11UA net-asset-value requirement for income tax.
• Neither may meet the Ind AS 113 fair-value standard for financial reporting, which emphasises market-participant assumptions.

The result of reusing a report is mismatches between your regulatory filings, tax returns and financial statements, exactly what triggers scrutiny. A single cross-border allotment often needs two reports, one for FEMA pricing and one supporting the income-tax position, and both must be on file. This is closely tied to the FEMA pricing and remittance rules for cross-border transactions.

The tax angle: 56(2)(x) and angel tax

Two income-tax provisions make valuation more than a formality:

• Section 56(2)(x) taxes the recipient when they receive shares for less than fair market value, the shortfall is treated as income from other sources above a threshold. This is why a compliant valuation matters even between related parties.
• Section 50CA deems FMV as the sale consideration when unquoted shares are transferred below it, so both the buyer and the seller can be taxed on the same transaction.

The DCF projection risk

Where a valuation uses discounted cash flow (DCF), the projections are where disputes arise. A common failure is an aggressive hockey-stick forecast that later diverges materially from actual performance, at which point the assessing officer challenges the valuation. The protection is contemporaneous evidence: board-approved business plans, dated financial models, and investment proposals that existed at the time of the valuation, not reconstructed afterward. A defensible DCF is one you can show was reasonable on the day it was signed.

Getting the right professional, the right method and the right supporting file is precisely the work. Our valuation services map your transaction to the correct rule and signatory, and prepare a report that stands up in diligence, tax scrutiny and regulatory filing.

Quick answers

When do I need a valuation? At each trigger, a funding round, share transfer, ESOP, merger or buyback, it is event-driven. Who signs? IBBI registered valuer for Companies Act, SEBI merchant banker for Rule 11UA DCF, CA for NAV and FEMA. Can I reuse one report? No, each law has different methods and signatories. What is Section 56(2)(x)? It taxes receiving shares below FMV as income. Is angel tax gone? Yes, Section 56(2)(viib) was withdrawn from TY 2025-26. Need a report? Our valuation team matches the rule to the signatory.