Reference to Valuation Officer for Capital Gains: Section 91, 15% and Rs 10 Lakh Test (Income Tax Act 2025)
Under section 91 of the Income-tax Act, 2025, the Assessing Officer (AO) can send a capital asset to a Valuation Officer (VO) when the value the taxpayer claims looks wrong. It applies for the capital gains Chapter, where fair market value matters. The trigger is either a registered valuer's estimate that the AO thinks is off, or a gap between the claimed value and fair market value of more than 15% of the asset's value or Rs 10 lakh (rule 55). The VO's report is due within six months from the end of the month of reference.
This guide explains the two triggers, how the margin works, who the VO is for a given asset, what the VO can do, and how to respond. All provisions are from the Act as amended by the Finance Act, 2026, and the Income-tax Rules, 2026. For the wider power to refer assets during assessment, see our post on valuation officer reference in assessment.
What does section 91 do?
Section 91(1) lets the AO refer "the valuation of the capital asset" to a Valuation Officer "for ascertaining the fair market value" of that asset for the capital gains Chapter. A Valuation Officer is a person appointed by the Central Government with powers under section 269 (section 2(110)). It is a separate tax-department officer, not the registered valuer the taxpayer may have hired.
Section 91 does not set the value itself. It only opens the door to a valuation. What the AO does with the report is governed by section 269(8): the AO may take the report into account in the assessment or reassessment after hearing the assessee.
When can the Assessing Officer make a reference?
| Situation | Provision | What the AO must be of the opinion |
|---|---|---|
| Assessee's value is based on a registered valuer's estimate | Section 91(1)(a) | The claimed value is at variance with fair market value |
| Any other case: size of gap | Section 91(1)(b)(i) | Fair market value exceeds the claimed value by more than the prescribed percentage of value or amount (15% / Rs 10 lakh, rule 55) |
| Any other case: nature of the asset | Section 91(1)(b)(ii) | Given the nature of the asset and other relevant circumstances, a reference is necessary |
Note the structure. Clause (a) is for taxpayers who already have a registered valuer's report. Clause (b) covers everyone else, and it has two limbs. Limb (i) is a numerical test. Limb (ii) is a judgment call with no number attached.
What is the 15% and Rs 10 lakh test under rule 55?
Section 91(1)(b)(i) leaves the margin to the rules. Rule 55 fills it in: "the percentage of the value of the asset shall be 15%; and the amount shall be ten lakh rupees". The Act's wording is that the fair market value must exceed the claimed value by more than the prescribed "percentage of value of such asset or amount".
In practice, the AO compares the excess (the AO's view of fair market value minus the claimed value) with 15% of the asset's value and with Rs 10 lakh. The rule does not spell out how the two figures combine when they point in different directions, so for assets where the excess falls between them, check the position with the latest official guidance before relying on either reading. Where the excess is above both, or below both, the answer is clear.
Worked example 1: both limits crossed (tax year 2026-27)
Assumptions: Meena sold a flat in tax year 2026-27 and claimed a value of Rs 80,00,000 without a registered valuer's report. The AO's own estimate of fair market value is Rs 95,00,000.
| Step | Working | Result |
|---|---|---|
| 1. Excess over claimed value | 95,00,000 − 80,00,000 | Rs 15,00,000 |
| 2. 15% of the asset's value | 15% × 80,00,000 | Rs 12,00,000 |
| 3. Compare with 15% | 15,00,000 > 12,00,000 | Exceeded |
| 4. Compare with Rs 10 lakh | 15,00,000 > 10,00,000 | Exceeded |
Both limits are crossed, so section 91(1)(b)(i) is met and a reference can be made.
Worked example 2: below both limits (tax year 2026-27)
Assumptions: Arun claims Rs 50,00,000 for a plot. The AO's estimate is Rs 55,00,000.
| Step | Working | Result |
|---|---|---|
| 1. Excess | 55,00,000 − 50,00,000 | Rs 5,00,000 |
| 2. 15% of 50,00,000 | 0.15 × 50,00,000 | Rs 7,50,000 |
| 3. Compare | 5,00,000 < 7,50,000 and < 10,00,000 | Not exceeded |
The numerical limb (i) is not met. The AO could still point to limb (ii), the nature of the asset and other circumstances, but would need to be of that opinion on the facts.
Which Valuation Officer handles the reference?
Rule 173 divides work by value where the asset is a building, land or rights in them and the Board has assigned those functions. For a reference under section 91(1), the value used is the value claimed by the assessee (rule 173(3)).
| Value claimed by the assessee | Officer who values (rule 173(1)(c)) |
|---|---|
| Up to Rs 1 crore | Assistant Valuation Officer |
| More than Rs 1 crore, up to Rs 5 crore | Valuation Officer |
| More than Rs 5 crore | District Valuation Officer |
A District Valuation Officer may take over a Rs 1 to 5 crore case, and a Valuation Officer may take over a case up to Rs 1 crore, if considered necessary for efficient management of valuation work (rule 173(5) and (6)). Value is taken for the asset as a whole, even if owned jointly (rule 173(7)).
Worked example 3: who values it (tax year 2026-27)
Assumptions: three reference cases, all for land or buildings, claimed values Rs 85 lakh, Rs 3.2 crore and Rs 6 crore.
- Rs 85 lakh is up to Rs 1 crore: Assistant Valuation Officer.
- Rs 3.2 crore is above Rs 1 crore and up to Rs 5 crore: Valuation Officer.
- Rs 6 crore is above Rs 5 crore: District Valuation Officer.
What does the Valuation Officer do after the reference?
Section 91(2) applies section 269(3) to (8) to a section 91 reference, with necessary modifications. In plain terms:
- Inspection. The VO, or an engineer, overseer, surveyor or assessor authorised by the VO, may enter land in the VO's area or inspect the asset, and may ask the person in charge to give facilities, including access to books and records relevant to the valuation (section 269(3)(a) and (b)).
- Consent and notice. Entry into a building or place, or inspection of the asset, needs the occupant's consent after at least two days' written notice (section 269(3)(c)).
- Hours. Between 6 a.m. and 6 p.m. on any day except public holidays; Sundays count as public holidays (rule 174).
- Hearing. The VO values the asset after considering the assessee's evidence and other evidence in the VO's possession, and after giving the assessee a hearing (section 269(4)).
- Non-cooperation. If the assessee does not cooperate, the VO may value to the best of judgment (section 269(5)). If facilities are refused or evaded, the VO has civil-court powers on discovery and inspection, summoning and examining persons on oath, production of documents and commissions (section 269(3)(d)).
- Report. A copy goes to both the AO and the assessee (section 269(6)). Mistakes apparent from the record can be rectified under section 287 (section 269(7)).
- Use by the AO. The AO may take the report into account after hearing the assessee (section 269(8)).
Worked example 4: the six-month clock (tax year 2026-27 assessment)
Assumption: the AO makes a reference on 18 March 2027. The report is due within six months from the end of the month of reference (section 269(9)). The month ends on 31 March 2027, so the report is due by 30 September 2027.
Real-life examples
Ravi, a registered valuer's report that the AO doubts. Ravi sold a shop and used a registered valuer's report to fix the value. The AO feels the report undervalues the shop. Section 91(1)(a) applies, since the claim rests on a registered valuer's estimate and the AO considers it at variance with fair market value. No numerical margin is needed. Ravi should provide the valuer's working, comparable sales and any documents the VO asks for, and attend the hearing.
Neha, no valuation report. Neha sold an inherited plot and simply stated a figure in her return. The AO thinks the true value is higher by well over Rs 10 lakh and over 15% of her figure. Section 91(1)(b)(i) is met. A reference can be made, and the VO values the plot after hearing Neha. If Neha stonewalls the VO, the VO can value to the best of judgment (section 269(5)), which may not favour her.
Common mistakes
- Assuming a registered valuer's report ends the matter. Section 91(1)(a) exists precisely for cases where the AO disagrees with such a report.
- Ignoring the notice to give access. Refusal or evasion triggers civil-court style powers and valuation to the best of judgment.
- Missing the hearing. The VO must hear the assessee, and the AO must hear the assessee again before using the report. Skipping either hearing gives up your chance to put evidence on record.
- Confusing section 91 with section 78(2). Section 78(2) is the reference route when the assessee says the stamp duty value is higher than fair market value. Section 91 is about the AO doubting the value the assessee claims. Both use the procedure of section 269(3) to (8). See full value of consideration and stamp duty value.
- Applying the margin to the wrong base. Rule 173(3) uses the value claimed by the assessee to pick the officer, and the margin is a percentage of the asset's value or Rs 10 lakh. Keep the working on file.
Quick reference
| Item | Rule | Where |
|---|---|---|
| Reference if registered valuer's value is at variance | AO's opinion | Section 91(1)(a) |
| Margin for other cases | 15% of value or Rs 10 lakh | Section 91(1)(b)(i), rule 55 |
| Notice before entry | At least 2 days in writing, with consent | Section 269(3)(c) |
| Inspection hours | 6 a.m. to 6 p.m., not on public holidays (Sundays included) | Rule 174 |
| Report deadline | 6 months from end of month of reference | Section 269(9) |
| Who gets the report | AO and assessee | Section 269(6) |
Where this is in the Act
- Section 91: reference to Valuation Officer
- Section 269: estimation of value of assets by Valuation Officer
- Section 78(2): reference where stamp duty value is disputed
- Section 2(110): definition of Valuation Officer
- Section 287: rectification of mistake
- Rule 55: conditions for reference under section 91(1)(b)
- Rule 173: jurisdiction of Valuation Officers
- Rule 174: day and time for inspection
How a CA firm can keep track
A reference adds hearing dates, document requests and a six-month report window to a client file. Finexo's practice management software can hold these dates and the documents requested per client so nothing slips. It does not value assets or draft replies for you.
This article is general information on the Act and Rules, not tax or legal advice for your situation.
Frequently Asked Questions
When can the Assessing Officer refer a capital asset to a Valuation Officer under section 91?
Under section 91(1), the Assessing Officer can refer the valuation of a capital asset to a Valuation Officer to find its fair market value for the capital gains Chapter. The two routes are: the assessee relied on a registered valuer's estimate but the officer thinks it differs from fair market value, or in any other case the officer thinks the fair market value exceeds the claimed value by the prescribed margin, or a reference is otherwise necessary given the nature of the asset.
What is the prescribed margin for a reference under section 91(1)(b)(i)?
Rule 55 of the Income-tax Rules, 2026 sets the percentage at 15% of the value of the asset and the amount at ten lakh rupees. The Act says 'percentage of value of such asset or amount', so the officer looks at the excess over the claimed value against these two figures.
How long does the Valuation Officer have to send the report?
Section 269(9) requires the report within six months from the end of the month in which the reference is made. It goes to both the Assessing Officer and the assessee (section 269(6)).
Does the assessee get a chance to be heard?
Yes. The Valuation Officer must consider the evidence the assessee produces and give an opportunity of being heard (section 269(4)). The Assessing Officer must also hear the assessee before using the report in the assessment (section 269(8)).
Can the Valuation Officer enter my property?
Only with consent and at least two days' written notice (section 269(3)(c)). Rule 174 limits entry to 6 a.m. to 6 p.m. on days other than public holidays, and Sundays count as public holidays. If you refuse facilities, the officer gets civil-court powers for discovery, summons and production of documents.