Full Form of FMV

What is FMV?

Fair Market Value (FMV) is the price at which an asset would change hands between a willing buyer and a willing seller, both having reasonable knowledge of the relevant facts and neither being under any compulsion to transact. In India, FMV is a critical concept used extensively in taxation, property valuation, corporate finance, and regulatory compliance. The Income Tax Act, 1961 mandates FMV for computing capital gains, valuing gifts (where the difference exceeds ₹50,000 triggers tax under Section 56(2)(x)), and for Employee Stock Option Plans (ESOPs) under the perquisite valuation rules. It is also applied in transfer pricing, stamp duty calculations, and company valuations during mergers and acquisitions. FMV is determined through various methods—comparable sales, discounted cash flow, or indexed cost of acquisition—depending on the asset type. Real estate transactions often use circle rates as a proxy, but actual FMV may differ. The concept is routinely tested in CA, CS, CMA, and CFA exams, where students must compute FMV for shares, immovable property, or business assets. Understanding FMV helps taxpayers avoid disputes with the Income Tax Department and ensures transparent pricing in unquoted transactions.

FMV का फुल फॉर्म

Example

The Income Tax officer asked the assessee to justify the FMV of the inherited jewellery to avoid tax on the difference.

FMV — frequently asked questions

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