Rule 11UA Valuation of Shares for Income Tax
Rule 11UA's method now sits in rule 57 of the Income-tax Rules, 2026, and for unquoted equity it is a net asset formula.
Rule 11UA was the Income-tax Rules, 1962 provision that fixed the fair market value of shares, securities, jewellery and art for income-tax. It decided how much income a buyer had when shares were acquired below value, and what sale price a seller of unquoted shares was deemed to have received.
From 1 April 2026 the Income-tax Act, 2025 and the Income-tax Rules, 2026 replaced the old Act and Rules. The method now sits in rule 57 of the 2026 Rules, with definitions and valuation dates in rule 56. The exam reads laws as at 30 June 2026, so learn the new numbers, but expect "Rule 11UA" in older material and in many questions' wording.
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Old and New References
Property received without or below fair value
Earlier: Income-tax Act, 1961 / Rules, 1962
Section 56(2)(x)
Current: Income-tax Act, 2025 / Rules, 2026
Section 92(2)(m)
Unquoted share sold below fair value
Earlier: Income-tax Act, 1961 / Rules, 1962
Section 50CA
Current: Income-tax Act, 2025 / Rules, 2026
Section 79
Fair market value method
Earlier: Income-tax Act, 1961 / Rules, 1962
Rule 11UA
Current: Income-tax Act, 2025 / Rules, 2026
Rule 57 (definitions in rule 56)
Share premium above fair value (angel tax)
Earlier: Income-tax Act, 1961 / Rules, 1962
Section 56(2)(viib), off from assessment year 2025-26
Current: Income-tax Act, 2025 / Rules, 2026
No equivalent
| Purpose | Earlier: Income-tax Act, 1961 / Rules, 1962 | Current: Income-tax Act, 2025 / Rules, 2026 |
|---|---|---|
| Property received without or below fair value | Section 56(2)(x) | Section 92(2)(m) |
| Unquoted share sold below fair value | Section 50CA | Section 79 |
| Fair market value method | Rule 11UA | Rule 57 (definitions in rule 56) |
| Share premium above fair value (angel tax) | Section 56(2)(viib), off from assessment year 2025-26 | No equivalent |
Fair Market Value by Type of Property (Rule 57)
- Quoted shares
- If acquired on a stock exchange, the transaction value. If acquired off-market, the lowest quoted price on the valuation date (or on the last earlier trading day).
- Unquoted equity shares
- An adjusted net asset formula: (A + B + C + D − L) × PV ÷ PE. No DCF option.
- Other unquoted shares and securities
- The price they would fetch in the open market on the valuation date; the assessee may obtain a report from a merchant banker or an accountant.
- Jewellery and artistic work
- Open-market price, or the invoice value if bought from a registered dealer that day; a registered valuer's report may be obtained above ₹50,000.
- Valuation date
- For section 92, the date the property is received. For section 79, the date the share is transferred.
Applying the Figure
- check_circleA buyer acquires 1 lakh shares from an unrelated seller at ₹30. The shortfall is ₹10 lakh, above the ₹50,000 threshold, so ₹10 lakh is the buyer's income under section 92(2)(m).
- check_circleOn the seller's side, section 79 deems ₹40 per share (₹40 lakh) to be the full value of consideration for capital gains.
- check_circleGifts from relatives, on marriage and by will or inheritance are outside section 92(2)(m); rule 58 adds a few prescribed classes, such as shares received under certain Tribunal-approved plans and strategic disinvestment.
- check_circleImmovable property inside the company is taken at stamp duty value (item D), not book value. That single line often decides the answer.
How the Valuation Examination Tests This
Expect the formula as a numerical (pick the right items for A and L) and one-liners on old and new section numbers. Two traps recur. First, DCF by a merchant banker was an option only for the angel-tax rule, which no longer applies; for a share transfer or gift, rule 57 gives only the net asset formula. Second, the income-tax "registered valuer" for jewellery and art is one registered with the Income-tax Department under section 514 of the 2025 Act, not an IBBI registered valuer.
FAQs
What is Rule 11UA called under the new Income-tax Rules, 2026?expand_more
Its fair market value method is in rule 57 of the Income-tax Rules, 2026, with definitions and valuation dates in rule 56. The 2026 Rules were notified on 20 March 2026 and apply from 1 April 2026.
How is the fair market value of unquoted equity shares calculated for income tax?expand_more
By the formula (A + B + C + D − L) × PV ÷ PE: adjusted book assets, plus market value of jewellery and art, fair value of securities and stamp duty value of property, less adjusted liabilities, pro-rated to the shares by paid-up value.
Can DCF be used for valuing shares under Rule 11UA?expand_more
Only under the old angel-tax provision, section 56(2)(viib), which stopped applying from assessment year 2025-26. For transfers and gifts of unquoted equity shares, rule 57 of the 2026 Rules prescribes only the net asset formula.
Does the old Rule 11UA still matter?expand_more
Yes, for transactions and assessments of tax years beginning before 1 April 2026, which continue under the 1961 Act and its rules.
Next steps
- ESOP Valuationarrow_forward
- NAV methodarrow_forward
- Capital Gains & Stamp Dutyarrow_forward
- SFA mock testarrow_forward
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