Definition of ‘Fair Market Value’ – Income Tax

As per S.2(22B) of the Income Tax Act, 1961, unless the context otherwise requires, the term “fair market value”, in relation to a capital asset, means-

i) the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date; and

ii) where the price referred to in sub-clause (i) is not ascertainable, such price as may be determined in accordance with the rules made under this Act.

In certain circumstances ascertaining the Fair Market Value of a capital asset becomes important for the purpose of taxation and / or assessments.