Valuation Report Needed 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.
Under the Companies Act, 2013, a plain transfer of shares between two persons does not call for a valuation report: section 56 prints no such condition. A valuation is required where the Act or the Rules say so for a particular transaction, such as a fresh issue, sweat equity or a transaction with a director. Foreign exchange law adds its own pricing rules when one party lives outside India, and tax is a separate subject. This guide reads the Companies Act, 2013 in the Ministry's consolidated text (last updated 29 July 2022) and the Rules as consolidated in the Ministry's e-book, consulted on 3 October 2026; later amendments should be checked.
Section 56 sets no valuation condition for a transfer between two persons: it asks for a duly stamped instrument of transfer. Section 247 says that where a valuation is "required to be made" under the Act, it is by a registered valuer appointed by the audit committee or the Board. The provisions that do require one include section 62(1)(c) (issue to any persons), section 54 and its rule (sweat equity), section 192 (non-cash deals with directors) and section 236 (purchase of minority shareholding). A transfer between a resident and a non-resident is subject to the pricing guidelines the Reserve Bank specifies under the foreign exchange rules. For tax, see our income-tax guides.
Section 56: transfer between two persons
Section 56(1) requires a proper instrument of transfer in the prescribed form, duly stamped, dated and executed by both sides and delivered within sixty days, along with the certificate. Nothing in the section calls for a valuation. The parties are at liberty to agree a price; the Act does not ask the company to test it. For stamp duty on the instrument, see our guide on stamp duty on shares.
If you want a transfer checked from start to finish, see our share transfer service.
Section 247: who values and when
Section 247(1) says that where a valuation is required to be made in respect of property, stocks, shares, debentures, securities or goodwill or any other assets, or the net worth or liabilities of a company, under a provision of the Act, it is valued by a person registered as a valuer, with the qualifications prescribed, and appointed by the audit committee or, in its absence, the Board. Section 247(2) requires an impartial, true and fair valuation with due diligence, in accordance with the rules, and no valuation of assets in which the valuer has a direct or indirect interest, now or within three years before or after. Section 247(3) prints a penalty of fifty thousand rupees for contravention, with an enhanced punishment where the intention is to defraud.
The Companies (Registered Valuers and Valuation) Rules, 2017 supply the detail. Rule 4 sets qualifications and experience in the "specified discipline" relevant to an asset class; rule 8 requires the valuer to follow valuation standards and to state in the report, among other things, the purpose, the valuation date, the sources relied on and the procedures adopted. An "asset class" under rule 2 is a distinct group of assets requiring a separate set of valuers. Where a firm or company is the valuer, only a partner or director registered for the asset class being valued may sign (rule 7); check the valuer's registration for the class before appointing one.
Where the Act or Rules do ask for a valuation
| Transaction | Provision | What it requires |
|---|---|---|
| Plain transfer between two persons | s.56 | No valuation condition |
| Issue of shares to any persons, cash or other than cash | s.62(1)(c) | Special resolution and price determined by the valuation report of a registered valuer |
| Preferential issue by an unlisted company | Rule 13, Share Capital Rules | Price on a registered valuer's report; for a listed company's preferential issue the rule says a valuer's report is not required; non-cash consideration valued by a registered valuer |
| Sweat equity shares | s.54; rule 8(6), (7) | Shares valued at a price determined by a registered valuer, with justification; intellectual property and know-how valued by a registered valuer |
| Asset deal with a director or connected person | s.192(2) | Notice includes the particulars and the value of the assets duly calculated by a registered valuer |
| Purchase of minority shareholding by a 90% holder | s.236(2) | Price determined on valuation by a registered valuer under the rules |
| Purchase of own shares by a trust for employees, unlisted company | Rule 16, Share Capital Rules | Valuation at which shares are purchased made by a registered valuer |
| Scheme of compromise or arrangement | s.230, s.232 | Valuation report of a registered valuer among the particulars in the sections as printed; read them for the exact case |
For the issue side, see our guide on shares issued for consideration other than cash and on section 247 registered valuers.
Resident and non-resident parties: the foreign exchange rules
Where one party is resident in India and the other is not, the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 apply. Rule 9, as first notified, allows a person resident outside India to transfer equity instruments to a person resident in India by sale or gift, and a person resident in India to transfer to a person resident outside India by sale, in each case subject to "pricing guidelines" and the documentation and reporting requirements specified by the Reserve Bank in consultation with the Central Government from time to time. The rule does not print a pricing formula; the Reserve Bank's guidelines do. The rules have been amended several times since 2019, including rule 9(1) in 2026, so read the current text. This article states no pricing figure.
Reporting is in the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 as the Reserve Bank publishes them. They require Form FC-TRS for the transfers they list, between a non-resident holding on a repatriable basis and either a non-resident holding on a non-repatriable basis or a resident, with the onus on the resident transferor or transferee in the cases there, within sixty days of transfer of equity instruments or receipt or remittance of funds, whichever is earlier. See our FDI reporting service and our guide on transfer of shares from resident to non-resident under FEMA.
Tax
How a transfer price is tested for tax, and what the other side's valuation means for the seller or the buyer, are questions for the Income-tax Act, 2025 and its rules: see our income-tax guides. This article gives no tax section or rate.
Worked example (invented names)
Kiran Mehta (resident) sells 1,000 equity shares of Zenith Parts Private Limited to Marta Weiss (non-resident), at Rs 600 per share. Zenith's Board needs no valuation report to register the transfer under section 56. But because one side is outside India, the parties must apply the Reserve Bank's pricing guidelines under rule 9(3) of the Non-debt Instruments Rules; what valuation, if any, they call for is for those guidelines to say. The sale consideration is 1,000 x 600 = Rs 6,00,000, and Form FC-TRS is reported within sixty days of the transfer or of receipt of funds, whichever is earlier. If instead Zenith issued 1,000 new shares to Marta, section 62(1)(c) and rule 13 would require a registered valuer's report for the price.
Common mistakes
- Insisting on a valuer's report for a resident-to-resident transfer because "the Act requires it".
- Assuming the Companies Act valuer rule also satisfies the foreign exchange pricing test.
- Appointing a valuer not registered for the right asset class, or one with a prior interest in the asset (section 247(2)(d)).
- Reporting late: the sixty-day window runs from transfer or receipt of funds, whichever is earlier.
- Treating a fresh issue as a transfer and skipping section 62(1)(c).
Need help with a share transfer or a valuation?
We can check whether your transaction needs a registered valuer's report, whether the foreign exchange pricing test applies, and what must be filed. See our share transfer service.
Key takeaways
- Section 56 prints no valuation condition for a transfer between two persons.
- Section 247 sends any valuation required by the Act to a registered valuer.
- Issue, sweat equity, director asset deals and minority purchase are cases where valuation is printed.
- A resident and a non-resident must follow the Reserve Bank's pricing guidelines.
- Tax treatment is separate: see the income-tax guides.
Read next
- Stamp Duty on Shares: Issue, Transfer and Gift
- Issue of Shares for Consideration Other Than Cash
- Section 247: Registered Valuers
- Transmission of Shares on a Shareholder's Death
Disclaimer: Based on the Companies Act, 2013 in the Ministry of Corporate Affairs consolidated text (last updated 29 July 2022), the Rules as consolidated in the Ministry's e-book and the other official texts named in this article, as consulted on 3 October 2026. Later amendments, notifications, circulars, forms and fees should be checked. Formats are general drafts to be adapted to the company's articles and facts. This article is general information, not legal advice; check the official text before acting.