Rule 3 - Determination of Fair market value - Income Declaration Scheme Rules, 2016

3. Determination of Fair market value (1) The fair market value of the asset shall be determined in the following manner, namely:- (a) the value of bullion, jewellery or precious stone shall be the higher of- (I) its cost of acquisition; and (II) the price such bullion, jewellery or precious stone shall ordinarily fetch if sold in the open market as on the 1st day of June, 2016, on the basis of the valuation report obtained by the declarant from a registered valuer; (b) the valuation of archaeological collections, drawings, paintings, sculptures or any work of art (hereinafter referred to as artistic work) shall be the higher of- (I) its cost of acquisition; and (II) the price such artistic work shall ordinarily fetch if sold in the open market as on the 1st day of June, 2016 on the basis of the valuation report obtained by the declarant from a registered valuer; (c) the value of shares and securities of- (I) quoted share and securities shall be the higher of- (i) its cost of acquisition; and (ii) the price determined by taking- (A) the average of the lowest and highest price of such shares and securities quoted on a recognised stock exchange as on the 1st day of June, 2016; or (B) the average of the lowest and highest price of such shares and securities on a recognised stock exchange on a date immediately preceding the 1st day of June, 2016 when such shares and securities were traded on a recognised stock exchange, where on the 1st day of June, 2016 there is no trading in such shares and securities on a recognised stock exchange; (II) unquoted equity shares shall be the higher of- (i) its cost of acquisition; and (ii) the value, on the 1st day of June, 2016, of such equity shares as determined in the following manner, namely:- the fair market value of unquoted equity shares = A+B-L (PV) (PE) where, A = book value of all the assets in the balance sheet (other than bullion, jewellery, precious stone, artistic work, shares, securities and immovable property) as reduced by,- (i) any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any, and (ii) any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset; B= fair market value of bullion, jewellery, precious stone, artistic work, shares, securities and immovable property as determined in the manner provided in this rule; L= book value of liabilities shown in the balance sheet, but not including the following amounts, namely:- (i) the paid-up capital in respect of equity shares; (ii) the amount set apart for payment of dividends on preference shares and equity shares; (iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation; (iv) any amount representing provision for taxation, other than amount of income-tax paid, if any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto; (v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities; (vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares; PE = total amount of paid up equity share capital as shown in the balance-sheet; PV= the paid up value of such equity share; (III) unquoted share and security other than equity share in a company shall be the higher of,- (i) its cost of acquisition; and (ii) the price that the share or security shall ordinarily fetch if sold in the open market on the 1st day of June, 2016, , on the basis of the valuation report obtained by the declarant from a registered valuer; (d) the fair market value of an immovable property shall be higher of- (I) its cost of acquisition; and (II) the price that the property shall ordinarily fetch if sold in the open market on the 1st day of June, 2016 on the basis of the valuation report obtained by the declarant from a registered valuer; 1 [Provided that where the acquisition of immovable property by the declarant is evidenced by a deed registered with any authority of a State Government, the fair market value of such property shall, at the option of the declarant, may be taken on the stamp duty value as increased by the same proportion as Cost Inflation Index for the year 2016-17 bears to the Cost Inflation Index for the year in which the property was registered: Provided further that where the immovable property was acquired before the 1st day of April, 1981, the provisions of the first proviso shall have effect as if for the words stamp duty value , the words the fair market value of the property as on 1st day of April, 1981 on the basis of the valuation report obtained by the declarant from a registered valuer , and for the words Cost Inflation Index for the year in which the property was registered , the words Cost Inflation Index for the year 1981-82 had been substituted. Explanation- For the purposes of this clause,- (i) stamp duty value means the value adopted or assessed by any authority of the State Government for the purposes of payment of stamp duty in respect of an immovable property; (ii) Cost Inflation Index means such index as notified under clause (v) of Explanation to section 48 of the Income-tax Act, 1961.] (e) value of an interest of a person in a partnership firm or in an association of persons or a limited liability partnership of which he is a member shall be determined in the manner as specified in clause (f); (f) The net asset of the firm, association of persons or limited liability partnership on the 1st day of June, 2016 shall first be determined and the portion of the net asset of the firm, association of persons or limited liability partnership as is equal to the amount of its capital shall be allocated among its partners or members in the proportion in which capital has been contributed by them and the residue of the net asset shall be allocated among the partners or members in accordance with the agreement of partnership or association or limited liability partnership for distribution of assets in the event of dissolution of the firm, association or limited liability partnership, or, in the absence of such agreement, in the proportion in which the partners or members are entitled to share profits and the sum total of the amount so allocated to a partner or member shall be treated as the value of the interest of that partner or member in the partnership or association. Explanation.- For the purposes of this clause the net asset of the firm, association of persons or limited liability partnership shall be (A + B - L), which shall be determined in the manner provided in sub-clause (II) of clause (c); (g) valuation of any other asset shall be higher of- (I) its cost of acquisition or the amount invested; and (II) the price that the asset would fetch if sold in the open market on the 1st day of June, 2016. Explanation- For the purposes of this rule,- (a) quoted share or security in relation to share or security means a share or security quoted on any recognized stock exchange with regularity from time to time, where the quotations of such shares or securities are based on current transaction made in the ordinary course of business; (b) unquoted share and security in relation to share or security means share or security which is not a quoted share or security; (c) balance sheet in relation to any company means the balance sheet of such company (including the notes annexed thereto and forming part of the accounts) as on 31st day of March, 2016, which has been audited by the auditor of the company appointed under the Companies Act, 2013 (18 of 2013) and where the balance sheet as on 31st day of March, 2016 is not audited, the balance sheet (including the notes annexed thereto and forming part of the accounts) which has been approved and adopted in the annual general meeting of the shareholders of the company. (2) Where investment in any asset is partly from an income which has been assessed to tax prior to assessment year 2017-18, the fair market value of the asset determined in accordance with sub-rule (1) shall be reduced by an amount which bears to the value of the asset as on the 1st day of June, 2016, the same proportion as the assessed income bears to the total cost of the asset. --------------------- Notes:- 1. Inserted vide Notification No. 74/2016 - Dated 17-8-2016