FMV (Fair Market Value) is the price a share would command in an open, arm's-length transaction between a willing buyer and a willing seller. For unlisted shares — which have no quoted exchange price — FMV is determined by a registered valuer using methods prescribed under the Income Tax Act, notably Rule 11UA.
Why it matters to you
FMV is the tax anchor for unlisted shares. It sets the perquisite value when an employee exercises an ESOP; under Section 56(2)(x) it can trigger tax if you buy shares well below FMV; and it informs the cost base for capital gains. Buying meaningfully below the certified FMV can create an unexpected tax liability.
Example: An investor who bought unlisted shares far below their Rule 11UA FMV faced tax on the difference as "income from other sources". See Rule 11UA and FMV under Section 56 and our note on fair value vs market price.