PROPERTY VALUATION

1. Valuation for Capital Gains (Taxation Purpose)

Used to compute the gain or profit when a property is sold, forming the basis for capital gains tax under Indian tax laws.

The cost of acquisition is compared with the sale consideration to determine capital gain.

• For properties purchased before April 1, 2001, the fair market value as on 1-4-2001 can be used as the cost base.
• "Sale consideration" is the higher of the actual sale price or the prevailing government circle (stamp duty) rate.

Net capital gain = Sale value – (Indexed cost of acquisition + improvement + transfer expenses)

Government-approved valuer’s reports or guidelines from the Income Tax Department may be required, especially when FMV as on a past date is used.

Market value or circle rate is critical for assessment in case of income tax scrutiny or when there is a large deviation between declared value and actual market rates.

Note : Applicable for Properties purchased before 23rd July

2. Market Valuation (Fair Market Value/Current Value)

Refers to the estimated price the property would fetch if sold in the open market on the relevant date.

Used for sale/purchase, mortgage, loan applications, insurance, balance sheet reporting, and settlement of disputes.

Determined by factors such as:

• Recent sale prices of similar properties in the same area (comparative method)
• Location, infrastructure, age, and condition of the property
• Circle rates/minimum government values (act as floor for stamp duty calculation)
• Income generation potential (for commercial/rental assets)

Done by government-approved valuers, real estate agents, or specialized property valuation firms.

Market valuation is frequently updated and can fluctuate with market trends and policy changes.

Summary Table

Type of Valuation	Purpose	Who Requires/Conducts It	Key Basis
Capital Gains Valuation	Calculating capital gains tax on sale	Sellers, Income Tax authorities	Sale price/circle rate, FMV on 1-4-2001, indexation
Market Valuation	Sale/purchase, loans, estate planning	Buyers, sellers, banks, insurance	Comparable sales, current trends, circle rate, property condition