Income Tax - Capital Gains

Section 50CA of Income Tax Act 1961: Transfer of Unquoted Shares Below Fair Market Value

Section 50CA is an anti-undervaluation provision for transfer of shares of a company other than quoted shares. Where the transfer consideration is lower than the prescribed fair market value, the prescribed fair market value is treated as the full value of consideration for computing capital gains under the Income-tax Act, 1961.

Law transition from 1 April 2026: The Income-tax Act, 2025 came into force on 1 April 2026 and repealed the Income-tax Act, 1961 subject to repeal and savings provisions. The 1961 Act continues to apply where saved by the new law, including proceedings relating to tax years beginning before 1 April 2026. This page explains Section 50CA of the 1961 Act and should be read with the applicable transition provisions for the relevant tax year and transaction.

What does Section 50CA provide?

Section 50CA applies where an assessee transfers a capital asset that is a share of a company other than a quoted share and the consideration received or accruing from the transfer is lower than the fair market value determined in the prescribed manner.

In such a case, the prescribed fair market value is deemed to be the full value of consideration for the purpose of computing capital gains under Section 48 of the Income Tax Act 1961.

Core rule under Section 50CA

If the actual consideration for transfer of a share other than a quoted share is less than its prescribed fair market value, the prescribed fair market value replaces the lower stated consideration for the purpose of Section 48.

Meaning of quoted share

For Section 50CA, a quoted share means a share quoted on a recognised stock exchange with regularity from time to time, where the quotation is based on current transactions made in the ordinary course of business. A share that does not satisfy this definition falls within the expression "share other than a quoted share" for this provision.

How fair market value is determined

The fair market value for Section 50CA is determined under the prescribed valuation rules. Rule 11UAA of the Income-tax Rules, 1962 provides that the fair market value of a share other than a quoted share is determined in the manner specified in the relevant provisions of Rule 11UA, with the valuation date being the date on which the share is transferred.

Issue	Section 50CA treatment
Asset transferred	Share of a company other than a quoted share.
Trigger	Actual consideration is lower than the prescribed fair market value.
Deemed consideration	The prescribed fair market value is treated as the full value of consideration.
Purpose	Computation of capital gains under Section 48 of the 1961 Act.
Valuation	Rule 11UAA read with the applicable provisions of Rule 11UA.
Valuation date	Date on which the share is transferred.

Exception for prescribed classes of persons

The proviso to Section 50CA authorises exclusion of consideration arising from transfers by prescribed classes of persons, subject to prescribed conditions. Accordingly, the section should not be applied in isolation where a transaction may fall within a notified or prescribed exception.

Practical effect of Section 50CA

Section 50CA can increase the amount treated as sale consideration for capital-gains computation even though the seller has actually agreed to receive a lower amount. The provision therefore makes the prescribed valuation of an unquoted share important when a transfer is proposed below fair market value.

Identify whether the share is a quoted share within the statutory definition.
Determine the applicable fair market value under the prescribed valuation rule as on the transfer date.
Compare that fair market value with the actual consideration received or accruing.
If the actual consideration is lower and no applicable exception applies, use the prescribed fair market value as the deemed full value of consideration for the relevant capital-gains computation.

Section 50CA and Section 48

Section 48 contains the general mode for computation of capital gains under the 1961 Act. Section 50CA modifies one component of that computation in specified unquoted-share transfers by deeming the prescribed fair market value to be the full value of consideration when the stated consideration is lower.

Income-tax Act 2025 transition

For tax years beginning on or after 1 April 2026, the Income-tax Act, 2025 is the principal income-tax statute. For earlier tax years and proceedings preserved by the repeal and savings provision, the Income-tax Act, 1961 can continue to govern. Before applying Section 50CA to a current matter, identify the relevant tax year, transfer date and the applicable transition rule.

Important: Valuation can materially affect taxable capital gains. The facts of the transfer, the type of share, the applicable valuation rule and any prescribed exception should be checked before relying on a deemed consideration figure.

Related provisions

For the surrounding capital-gains framework, see Section 45 - Capital gains, Section 47 - Transactions not regarded as transfer, Section 48 - Mode of computation, Section 49 - Cost with reference to certain modes of acquisition, Section 50C - Full value of consideration in certain property transfers and Sections 50D and 51.

Updated: 28 September 2026. This article is for general legal and tax information. Apply the statute, rules, notifications and transition provisions relevant to the particular tax year and facts.