Valuation under the Income-tax Act, 2025: Sections 513 & 514, Rules 246–249 and Forms 169 & 170 Explained

The Income-tax Act, 2025, read with the Income-tax Rules, 2026, introduces a structured and codified framework for valuation under Indian tax law. Unlike the earlier regime where valuation provisions were scattered across multiple sections and rules, the new framework consolidates and standardizes the approach through clearly defined provisions.

The valuation regime is primarily governed by Section 513 and Section 514, supported by Rules 246 to 249 and reporting requirements under Form 169 and Form 170. These provisions collectively establish a rule-driven mechanism for determining value in situations where tax computation depends on fair market value (FMV) or prescribed valuation.

A key shift in the new regime is the movement from discretionary or interpretational valuation practices to prescribed methodologies, mandatory professional involvement, and standardized reporting. This ensures consistency, transparency, and alignment with statutory requirements.

Valuation Framework under the New Regime – A Structured Flow

To understand the framework holistically, valuation under the Act operates in the following sequence:

Trigger under Section 513 → Valuation by professional under Section 514 → Method prescribed under Rules 246–249 → Reporting in Form 169 → Disclosure through Form 170

This integrated structure ensures that valuation is not an isolated exercise but a compliance-driven process embedded within tax computation.

Section 513 – Statutory Requirement of Valuation

Section 513 is the cornerstone provision governing valuation under the Income-tax Act, 2025. It mandates valuation in cases where determination of value is required for the purposes of the Act and such value is to be computed in a prescribed manner.

When does Section 513 apply?

Section 513 becomes relevant in situations where:

• The value of an asset, property, or consideration is not directly ascertainable, or
• The Act specifically requires determination based on fair market value, or
• The computation of income depends on a value that must be determined as per prescribed rules

The provision ensures that in all such cases, valuation is not left to estimation or discretion but must follow a rule-based methodology.

Legal Significance of Section 513

Section 513 performs three important functions:

1. Creates a mandatory valuation trigger
   Wherever valuation is required under the Act, it must be carried out in accordance with prescribed rules.
2. Links valuation with computation provisions
   The outcome of valuation directly affects the computation of taxable income.
3. Ensures uniformity in valuation approach
   By mandating prescribed methods, the provision eliminates inconsistency.

Section 514 – Valuation by Registered Valuer and Fee Framework

Section 514 provides the procedural and professional framework for carrying out valuation.

Who can perform valuation?

Valuation must be carried out by:

• A registered valuer, or
• An “accountant” meeting prescribed conditions

The definition of “accountant” under the Rules is not generic. It includes specific eligibility criteria such as:

• Minimum professional experience
• Threshold of professional receipts
• Conditions applicable to individuals and entities

Fee Structure under Section 514

The Act prescribes a slab-based fee structure for valuation:

• Higher percentage for lower value assets
• Lower percentage for higher value assets

This standardization ensures:

• Transparency in professional charges
• Prevention of excessive or arbitrary fees

Mandatory Submission of Valuation Report

Valuation must be documented and furnished in the prescribed format. Without submission of the report, the valuation exercise remains incomplete from a compliance perspective.

Rule 246 – Foundational Basis of Valuation

Rule 246 establishes the conceptual framework for valuation under the Rules.

It provides that valuation must be based on the fair market value, i.e., the price that an asset would ordinarily fetch in the open market.

The rule acts as a linking provision, connecting Section 513 with detailed methodologies under subsequent rules. It ensures that all valuation exercises are grounded in a uniform principle—market-based valuation.

Rule 247 – Determination of Fair Market Value (FMV)

Rule 247 lays down the methodology for determining fair market value and is one of the most critical provisions in the valuation framework.

Market-Based Determination

Where market data is available, valuation is based on observable market prices. In the case of listed shares, the concept of “observable price” is applied.

The observable price is determined as the higher of:

• Average of weekly high and low closing prices over the preceding six months, or
• Average of weekly high and low closing prices over the preceding two weeks

This approach ensures that valuation reflects both:

• Long-term market trends
• Recent market movements

Non-Market-Based Determination

Where market price is not available, valuation is carried out using:

• Recognized valuation methodologies
• Determination by an accountant or merchant banker
• Internationally accepted valuation principles

This ensures flexibility while maintaining a structured approach.

Similar valuation principles become relevant in transactions involving issuance of shares against non-cash consideration, where fair market value determination plays a critical role in regulatory compliance and transaction structuring.

Rule 248 – Valuation of Specific Asset Classes

Rule 248 provides detailed guidance for valuation of different types of assets. For clarity, the valuation framework can be summarized as follows:

Key Principles under Rule 248

• Listed Assets: Based on market-derived observable price
• Unlisted Assets: Based on professional valuation
• Entity Interests: Value allocated based on capital and residual interest
• Other Assets: Determined based on price in open market

This ensures that valuation reflects both market conditions and financial position.

The valuation of unquoted shares under the new tax regime involves specific principles and methodologies, which are explained in detail in our guide on valuation of unquoted shares under the Income-tax Act, 2025 (Rule 57).

Rule 249 – Supplementary Valuation Provisions

Rule 249 provides supporting provisions to ensure consistency and completeness of valuation.

It addresses:

• Adjustments required in valuation
• Application of rules across different scenarios
• Consistency in methodology

The rule reinforces that valuation must:

• Be applied uniformly
• Align with the overall statutory framework
• Reflect prescribed computation principles

Forms 169 and 170 – Valuation Reporting Framework

Valuation under the Act is not complete without compliance with prescribed reporting formats.

Form 169 – Valuation Report

Form 169 is the primary document for submission of valuation results.

It includes:

• Description of asset or property
• Basis and methodology of valuation
• Key assumptions
• Certification by valuer

Importance:

• Forms the primary basis for tax authority review
• Critical in assessment and scrutiny proceedings
• Acts as documented justification of valuation

Form 170 – Supporting Compliance Document

Form 170 serves as a supporting document providing additional disclosures in relation to the valuation.

It ensures:

• Completeness of information
• Alignment with return filing requirements
• Compliance with procedural aspects of valuation

Certification Requirement

Both forms require:

• Signing and verification by a qualified professional
• Certification of correctness and completeness

This formalizes valuation as a regulated and auditable process.

Key Takeaways

• Valuation is now mandatory where prescribed under Section 513
• Professional valuation under Section 514 is essential
• Rules 246–249 provide a structured methodology
• Observable price concept strengthens market-based valuation
• Forms 169 and 170 ensure standardized reporting and compliance

FAQs on Valuation under Income-tax Act, 2025

1. When is valuation required under Section 513?

Valuation is required where the Act mandates determination of value of assets, property, or consideration in a prescribed manner, particularly where such value is not directly ascertainable.

2. Who is eligible to perform valuation under Section 514?

Valuation must be carried out by a registered valuer or an accountant meeting specific eligibility conditions prescribed under the Rules.

3. Can the Assessing Officer reject a valuation report?

Yes, if the valuation report is not in accordance with prescribed rules or lacks proper basis, the Assessing Officer may not accept it and may determine value independently.

4. How is fair market value determined under Rules 246–249?

FMV is determined based on observable market price where available, or through recognized valuation methodologies applied by qualified professionals.

5. What is the role of Form 169?

Form 169 is the prescribed valuation report containing methodology, assumptions, and certification, forming the basis for tax compliance.

6. What is Form 170 used for?

Form 170 is a supporting compliance document that provides additional disclosures and ensures completeness of valuation reporting.

Conclusion

The framework for valuation under the Income-tax Act 2025 establishes a structured and rule-based system that integrates statutory provisions, prescribed valuation methodologies, and standardized reporting requirements.

By combining:

• Section 513 (valuation trigger)
• Section 514 (registered valuers and fee framework)
• Rules 246–249 (valuation methodology and procedural rules)
• Forms 169 & 170 (valuation reporting and documentation)

the Act creates a transparent and consistent valuation ecosystem aligned with tax compliance and regulatory standards.

This framework strengthens the legal and procedural foundation of valuation while ensuring greater accuracy, accountability, and consistency in tax-related transactions under the new income-tax regime.

At N Pahilwani & Associates, we assist businesses, investors, startups, and professionals with valuation advisory, valuation reports, tax compliance support, and regulatory guidance under the Income-tax Act 2025.

Connect with our experts today for professional valuation and compliance assistance.