Sections 79 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Four short sections of the capital gains part fix values where the actual figures cannot be relied on. Section 79 deems the fair market value to be the consideration for unquoted shares sold for less; section 80 does the same where consideration cannot be ascertained; section 81 deducts advance money retained from the cost of acquisition; and section 91 lets the Assessing Officer refer a valuation to a Valuation Officer. This article reads them as per the Income-tax Act, 2025 as amended by the Finance Act, 2026; later amendments, rules and notifications should be checked. For the computation itself, see our capital gains calculation service.
If an unquoted share is sold for less than its fair market value (as determined in the prescribed manner), that value is the full value of consideration (section 79). If consideration cannot be ascertained, fair market value on the date of transfer is used (section 80). Advance money retained from failed negotiations reduces the cost of acquisition unless it was already taxed (section 81). The Assessing Officer may refer valuation to a Valuation Officer (section 91).
Section 79: transfer of shares other than quoted shares
Section 79(1). If the consideration received or accruing from the transfer of a capital asset, being a share of a company other than a quoted share, is less than the fair market value of the share determined in the manner as may be prescribed, the value so determined is deemed to be the full value of consideration for the purposes of section 72. The method of determination is left to the Income-tax Rules, 2026.
Section 79(2). Sub-section (1) does not apply to consideration received or accruing from a transfer by such class of persons, and subject to such conditions, as may be prescribed. The classes are not in the text consulted.
Section 79(3). "Quoted share" means a share quoted on any recognised stock exchange with regularity from time to time, where the quotation is based on current transactions made in the ordinary course of business.
Example (invented). Nandini sells 1,000 shares of a private company for Rs. 400 each, a total of Rs. 4,00,000. Fair market value determined in the prescribed manner is Rs. 550 per share, a total of Rs. 5,50,000. Because the consideration is less than that value, Rs. 5,50,000 is deemed to be the full value of consideration under section 79(1), unless sub-section (2) excludes her class of person. The remaining computation is in section 72; the equivalent rule for land and buildings is in section 78 on stamp duty value.
Section 80: consideration not ascertainable
If the consideration received or accruing from the transfer of a capital asset is not ascertainable or cannot be determined, its fair market value on the date of transfer is deemed to be the full value of consideration received or accruing, for computing income under "Capital gains". The section has one paragraph and no exceptions; what counts as "not ascertainable" is not defined in the text.
Section 81: advance money received
Where a capital asset was, "on any previous occasion", the subject of negotiations for its transfer, any advance or other money received and retained by the assessee in respect of the negotiations:
- (a) is deducted from the cost for which the asset was acquired, or from the written down value or fair market value (as the case may be), in computing the cost of acquisition; but
- (b) is not deducted from that cost where the advance or other money has been included in the total income of the assessee for any tax year as per section 92(2)(h) of this Act or section 56(2)(ix) of the Income-tax Act, 1961.
The reference to the Income-tax Act, 1961 is quoted as printed and nothing is added about that Act. The words "on any previous occasion" are printed in the section; the Act does not elsewhere use them as a defined term.
Example (invented). Mahesh bought a plot for Rs. 5,00,000. A buyer paid him an advance of Rs. 50,000 in an earlier deal that fell through, and he kept it. He later sells the plot. Under section 81(a) the cost of acquisition is Rs. 5,00,000 – Rs. 50,000 = Rs. 4,50,000. If the Rs. 50,000 had already been included in his total income under section 92(2)(h), section 81(b) says it is not deducted and the cost stays at Rs. 5,00,000. Section 92 is explained in our note on income from other sources; the cost rules for gifted and inherited assets are in section 90 on cost of acquisition.
Section 91: reference to the Valuation Officer
For ascertaining the fair market value of a capital asset for "this Chapter" (Chapter IV), the Assessing Officer may refer the valuation to a Valuation Officer in two cases.
| Clause | When the reference may be made |
|---|---|
| 91(1)(a) | The value claimed by the assessee is as per the estimate of a registered valuer, but the Assessing Officer is of the opinion that it is at variance with fair market value |
| 91(1)(b)(i) | In any other case, the Assessing Officer is of the opinion that the fair market value exceeds the value claimed by more than the percentage of value of the asset, or the amount, as may be prescribed |
| 91(1)(b)(ii) | In any other case, the Assessing Officer is of the opinion that, having regard to the nature of the asset and other relevant circumstances, it is necessary to do so |
Section 91(2). The provisions of section 269(3) to (8) apply, with necessary modifications, to such a reference. The procedure is in those sub-sections and is not repeated here.
Section 78(2) separately allows a reference where the assessee claims that stamp duty value exceeds fair market value; see section 78.
How the four sections fit together
| Section | Trigger | Value used |
|---|---|---|
| 79 | Unquoted share sold for less than prescribed fair market value | The prescribed fair market value |
| 80 | Consideration not ascertainable | Fair market value on the date of transfer |
| 81 | Advance money retained from earlier negotiations | Cost of acquisition reduced by the advance, unless taxed already |
| 91 | Doubt about value claimed | Valuation by Valuation Officer, as the procedure in section 269 provides |
For the exemption sections that follow, see the live notes on section 82, section 85 and section 86.
Need help valuing an asset for capital gains?
Unquoted shares and assets with uncertain consideration invite valuation questions. Our capital gains calculation team can help you work out the figures to use and what to keep ready if a reference to a Valuation Officer is made.
Key takeaways
- Section 79 deems prescribed fair market value as consideration if an unquoted share is sold for less.
- Quoted shares are those quoted on a recognised stock exchange with regularity, on current transactions.
- Section 80 uses fair market value on the transfer date where consideration cannot be ascertained.
- Advance money retained reduces cost of acquisition, unless already included in total income.
- Section 91 gives the Assessing Officer power to refer valuation, applying section 269(3) to (8).
Read next
- Section 83–84: agricultural land and compulsory acquisition
- Section 77: slump sale
- Section 78: stamp duty value
- Capital gains sections mapping
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.