For anyone selling a property, jewellery or other asset they owned before 1 April 2001, and for the accountant preparing the return.
If you acquired a capital asset before 1 April 2001, you can choose to treat its fair market value as on 1 April 2001 as your cost of acquisition instead of what you actually paid. That usually reduces the taxable capital gain substantially, because the original cost of a property bought in, say, 1985 is tiny compared with its 2001 value.
There is one important limit, and it catches people out: for land or building or both, that fair market value cannot exceed the stamp duty value of the same property as on 1 April 2001, where a stamp duty value for that date is available. This cap applies only to land and buildings. It does not apply to jewellery, shares, or other assets.
| Governing provision | Section 55(2)(b) of the Income-tax Act, 1961 (cost of acquisition where the asset was acquired before 1 April 2001) |
|---|---|
| What you may substitute | Fair market value of the asset as on 1 April 2001, in place of actual cost |
| The cap, and what it covers | For a capital asset being land or building or both, FMV on 1 April 2001 may not exceed the stamp duty value of that asset on 1 April 2001, where such stamp duty value is available. Introduced by the Finance Act 2020, applicable from assessment year 2021-22. |
| What the cap does NOT cover | Jewellery, shares and securities, and other assets that are not land or building. For those, the FMV option applies without a stamp-duty ceiling. |
| "Stamp duty value" means | The value adopted, assessed or assessable by a Central or State Government authority for the purpose of payment of stamp duty on immovable property. |
| Current LTCG rate on land/building | 12.5% without indexation. Resident individuals and HUFs may instead opt for 20% with indexation where the land or building was acquired before 23 July 2024 and transferred on or after that date. |
Capital gains tax is charged on the difference between what you sell an asset for and what it cost you. For assets held for decades that produces an absurd result: a plot bought in 1978 for ₹15,000 and sold today would be taxed almost entirely on inflation rather than on any real gain.
The law deals with this by letting you reset the clock. For anything acquired before 1 April 2001, you may substitute the asset's fair market value on that date for its actual cost. The cost inflation index is also based at 2001-02 = 100, so the two work together where indexation applies. The date moved from 1 April 1981 to 1 April 2001 with effect from assessment year 2018-19; older guidance still referring to 1981 values is out of date.
Until the Finance Act 2020, a valuer could certify any defensible fair market value as on 1 April 2001 and that figure became the cost of acquisition. In practice, valuations drifted upward, because a higher 2001 value means a lower taxable gain.
The Finance Act 2020 closed that by adding a ceiling: where the capital asset is land or building or both, the fair market value as on 1 April 2001 shall not exceed the stamp duty value of that asset as on 1 April 2001, where such stamp duty value is available. So the practical position today is:
That second case is more common than people expect, and it is exactly where the quality of the valuation report matters, because there is no external figure to fall back on.
The cap is written to apply to "a capital asset, being land or building or both". Jewellery is not land or a building. Neither are shares, nor works of art.
So if you are selling gold or jewellery inherited or acquired before April 2001, the fair market value as on 1 April 2001 is determined on its merits - typically from documented bullion and gold rates for that date, adjusted for purity, weight and the nature of the piece - and no stamp duty ceiling applies, because stamp duty values exist only for immovable property.
This is also where the credential question becomes concrete. Jewellery is a separate registered-valuer class from immovable property. See our guide to the jewellery valuer classes under the Income-tax Rules, 2026 for which registration actually covers this work.
This is the part no national guide can answer for you, and we would rather say so than pretend otherwise. Stamp duty and registration are administered by each state, and the accessibility of 2001-era records varies enormously:
Establishing which of those three situations applies to your property is generally the first real step in the work, and it determines whether the cap is even in play. Ask specifically about this before commissioning a valuation - a report that assumes a 2001 stamp duty value that was never notified is a report that will not survive scrutiny.
A retrospective valuation is an evidence exercise, not an opinion. The report needs to show its working, because the assessing officer is entitled to ask how the figure was arrived at twenty-five years after the fact. In practice that means:
The Finance (No. 2) Act 2024 changed the rate structure for long-term capital gains. The standard position is now 12.5% without indexation. For land or building acquired before 23 July 2024 and transferred on or after that date, a resident individual or HUF may instead opt for 20% with indexation, whichever produces the lower tax.
Your 1 April 2001 fair market value matters under both routes, because it is the cost of acquisition either way. Under the 20%-with-indexation route it is also the figure the cost inflation index is applied to. Which of the two routes is better is an arithmetic question specific to your holding period and price movement - it is worth having your accountant compute both before filing, and the valuation report should give them a figure solid enough to use in either calculation.
Everything stated above is checkable. These are the documents it comes from - read them yourself rather than relying on this summary for anything that carries consequences.
Tell us the asset, the location and roughly when it was acquired. We will tell you which registered-valuer class applies, whether a 2001 stamp duty value is likely to be available in that state, and what the report will need to contain.