Skip to content
Direct Tax Code / Income Tax

Reference to Valuation Officers — The 15% / ₹10 Lakh Threshold Explained

A detailed guide to the Valuation Officer reference mechanism under the Direct Tax Code, explaining the 15% and ₹10 lakh thresholds for making a reference.

25 Jul 20264 min read

Section 91 of the Income Tax Act, 2025 empowers the Assessing Officer to refer the valuation of a capital asset to a Valuation Officer for ascertaining its fair market value【91†L0】. Rule 55 of the Income Tax Rules, 2026 specifies the thresholds that trigger such a reference【55†L0】. Understanding these provisions is essential for taxpayers and practitioners.

The Statutory Framework

Section 91

Section 91 provides that for ascertaining the fair market value of a capital asset, the Assessing Officer may refer the valuation to a Valuation Officer in two circumstances【91†L0】:

  • If the value of the asset claimed by the assessee is as per the estimate by a registered valuer, but the Assessing Officer is of the opinion that the value so claimed is at variance with its fair market value
  • In any other case, if the Assessing Officer is of the opinion that the fair market value of the asset exceeds the value claimed by the assessee by more than the prescribed percentage or amount, or having regard to the nature of the asset and other relevant circumstances, it is necessary so to do

Rule 55: The Prescribed Thresholds

Rule 55 specifies the thresholds for making a reference to a Valuation Officer【55†L0】:

  • The percentage of the value of the asset shall be 15%
  • The amount shall be ₹10 lakh

Understanding the Thresholds

Percentage Threshold (15%)

The Assessing Officer may refer the valuation to a Valuation Officer if the fair market value of the asset exceeds the value claimed by the assessee by more than 15%. This percentage-based threshold applies regardless of the absolute value of the asset.

Amount Threshold (₹10 Lakh)

The Assessing Officer may refer the valuation to a Valuation Officer if the fair market value of the asset exceeds the value claimed by the assessee by more than ₹10 lakh. This absolute threshold applies regardless of the percentage difference.

Application of Thresholds

The thresholds apply when:

  • The value claimed by the assessee is not supported by a registered valuer's report
  • The Assessing Officer has reason to believe that the fair market value exceeds the claimed value

The Reference Process

When a Reference May Be Made

A reference may be made:

  • During the course of assessment or reassessment proceedings
  • Before the assessment is completed
  • Where the Assessing Officer has reason to believe that the valuation is incorrect

Valuation Officer's Role

The Valuation Officer shall【269†L0】:

  • Estimate the value of the asset after taking into account such evidence as the assessee may produce
  • Give an opportunity of being heard to the assessee
  • Send the report of the estimate to the Assessing Officer and the assessee

Timeline

The Valuation Officer shall send the report within six months from the end of the month in which the reference is made【269†L0】.

Practical Implications

For Taxpayers

  • Maintain Proper Documentation: Ensure that the valuation is supported by proper documentation
  • Consider Registered Valuer: Consider obtaining a registered valuer's report to support the claimed value
  • Challenge Excessive Valuation: If the Assessing Officer proposes to refer the valuation, consider challenging the basis

For Tax Practitioners

  • Monitor Thresholds: Monitor whether the claimed value is within 15% of the estimated fair market value
  • Consider Safe Harbour: The 110% safe harbour for stamp duty value may provide protection
  • Prepare for Reference: If a reference is likely, prepare the necessary documentation

Consequences of Reference

If Valuation Officer's Report Supports Assessee

  • The assessment will proceed based on the value claimed by the assessee
  • The Assessing Officer cannot make an addition on this ground

If Valuation Officer's Report Supports Revenue

  • The assessment will be based on the value determined by the Valuation Officer
  • The assessee may challenge the Valuation Officer's report

Expert Legal Guidance

Understanding the Valuation Officer reference mechanism is essential for tax compliance in cases involving valuation disputes. Anuj Desai & Associates provides expert advisory services on Direct Tax Code compliance, helping taxpayers navigate the reference process and protect their interests.


Compliance Guidereference to Valuation OfficerValuation Officer reference threshold15% valuation threshold10 lakh valuation thresholdValuation Officer Section 91Valuation Officer capital gainsValuation Officer fair market valueValuation Officer reference conditionsValuation Officer prescribed percentageValuation Officer prescribed amountValuation Officer immovable propertyValuation Officer unquoted sharesValuation Officer reference procedureValuation Officer reportValuation Officer assessmentValuation Officer tax compliance
Share

Related insights

Work with ADA

Ready to talk to an advisor?

Book a consultation and get a clear, considered view from a team that handles audit, tax, regulatory and cross-border work under one roof.