Fair Market Value (FMV)

Fair Market Value (FMV) – Fair Market Value is the estimated price at which an asset would change hands between a willing buyer and a willing seller, both having reasonable knowledge of the relevant facts and neither being under any compulsion to buy or sell. FMV is widely used for income tax purposes, including capital gains computation, gift valuation, and transfer of assets. The Assessment Year (AY) is the year in which the income earned or the transaction occurring during the previous Financial Year (FY) is assessed and taxed.

Example: If an asset is sold during FY 2022–23, the capital gains are calculated based on the sale price or FMV, and the income is assessed and taxed in AY 2023–24..