When Indian Law Requires a Registered Valuer
Where Indian company law, FEMA and income tax each require an independent valuation, which section triggers it, and who is allowed to sign that report.
Whenever value moves between a company and its own shareholders or directors on terms the company itself proposes, Indian law generally wants an independent number behind it, not a figure the promoter or the finance team worked out alone. Three different laws ask for that valuation at different moments, and each names a different kind of professional to sign it.
This guide lists the main situations under the Companies Act, 2013 that call for a registered valuer, then where FEMA and income tax separately ask for a valuation, and who is actually allowed to certify each one.
Why company law asks for an outside number
Section 247 of the Companies Act, 2013, read with the Companies (Registered Valuers and Valuation) Rules, 2017, created a formal category of professional, registered with the Insolvency and Bankruptcy Board of India, who alone may give a valuation report under the Act for the situations the Act names. The point of requiring this specific registration is independence: the person signing the report cannot be the company's own management, and in several of the triggers below cannot be connected to the company at all.
The main triggers under the Companies Act
A registered valuer's report is required, among other situations, for:
- Preferential allotment or private placement of shares under section 62(1)(c): the issue price needs a registered valuer's report before the special resolution approving the issue is passed
- Sweat equity shares under section 54: the valuation of the sweat equity and the shares issued for it must come from a registered valuer
- Non-cash transactions with directors under section 192: when a company and a director, or someone connected to a director, exchange non-cash assets, the notice seeking member approval must state the value of the assets as determined by a registered valuer
- Schemes of compromise, arrangement, merger or demerger under sections 230 to 232: the notice to members and creditors is accompanied by a registered valuer's report on the share exchange ratio and the assets involved
- Buy-out of minority shareholders under section 236: once an acquirer, together with persons acting in concert, holds 90 percent or more of a company's shares, the price offered to the remaining minority shareholders is the price a registered valuer determines
Where FEMA asks for a valuation
Issuing or transferring shares to, or buying them back from, a non-resident also needs a valuation: a floor price applies when a non-resident subscribes to or buys shares, and a ceiling applies when a non-resident sells to a resident. Our guide to FC-GPR filing covers the filing mechanics; this piece is only about which trigger needs a valuer in the first place.
Where income tax asks for a valuation
Rule 11UA of the Income-tax Rules, 1962 sets out how to compute the fair market value of unquoted equity shares, a number that then feeds section 56(2)(x), taxing a buyer who receives shares below fair market value, and section 50CA, which treats that fair market value as the seller's sale consideration where the actual price is lower. These section numbers follow the Income-tax Act, 1961, which applies for FY 2025-26; the Income-tax Act, 2025 applies from 1 April 2026 and renumbers them. Our guides to angel tax under section 56 and to the startup valuation report cover this ground in depth.
Who is allowed to sign which report
For every Companies Act trigger above, the report must come from a registered valuer: an individual or entity registered with the Insolvency and Bankruptcy Board of India in the relevant asset class under the 2017 rules, not merely a practising chartered accountant. For FEMA pricing, the valuation is certified by a SEBI-registered merchant banker or a practising chartered accountant. Rule 11UA's discounted cash flow option, certified by a merchant banker, applied only to section 56(2)(viib), the angel tax provision abolished from FY 2024-25. For the fair market value that still feeds section 56(2)(x) and section 50CA, only the formula-based method under Rule 11UA applies, and it can be worked out by the company itself or its chartered accountant.
The firm is not itself a registered valuer or a merchant banker. What it does is work out which of these triggers applies to what a client is planning, brief the registered valuer or merchant banker on the transaction and the business plan, review the draft report against the section that required it, and time the engagement so a report's validity window, where the law sets one, does not lapse before the transaction closes.
Frequently asked questions
Is a chartered accountant the same as a registered valuer?
No. A practising chartered accountant can certify a FEMA valuation and some income tax valuations, but the Companies Act triggers, such as preferential allotment, sweat equity, section 192 transactions and NCLT schemes, need a report from someone specifically registered as a valuer with the Insolvency and Bankruptcy Board of India, which is a separate registration even for a CA who holds it.
Does a startup issuing shares to new investors always need a registered valuer?
Generally yes, for a preferential allotment or private placement under section 62(1)(c). A rights issue to existing shareholders in their own proportion, or a bonus issue, is priced differently and does not carry the same requirement.
How long is a valuation report valid?
It depends on which law asked for it. The FEMA pricing rules for issuing shares to a non-resident do not themselves fix a shelf life for the valuation, but the bank that processes the FC-GPR expects a recent report, and in practice one dated within about 90 days of the issue is the usual expectation; check our FC-GPR filing guide for how this is applied.
Can the company's own CFO or accountant sign the valuation instead?
No. Every one of these triggers exists to keep the valuation independent of the company's own management, and most of them name a specific category of outside professional. The number cannot come from inside the finance team, however capable that team is.
Related guides
- Valuation methods: DCF, NAV and multiples explained
- The startup valuation report, explained
- Merger routes in India: NCLT scheme vs fast-track
- Valuation and advisory services
This is part of how I work with founders on valuation. See the full service, or book a consultation.
Chartered Accountant and Managing Partner at DRSPV & Associates (est. 2023), an ICAI-registered firm that has advised 500+ businesses across India, UAE, the US and UK. IBBI Registered Valuer and DISA (ICAI) certified. Writes on SME & mainboard IPO, fundraising and cross-border structuring.