Art is always a capital asset in the hands of an individual under the Income Tax Act — by virtue of its specific inclusion in Section 2(14)(ii) as excluded from the personal effects exemption.
Unlike a personal motor car or household furniture, the painting in a collector’s living room is a capital asset and its sale triggers capital gain.
The Government Approved Art Capital Gain Valuer’s Rule 11UA(1)(a) certificate is required for: the FMV at the disposal date for computing the gain; the Section 55(2)(b) FMV as on 1 April 2001 for pre-2001 PAG and other art collections; and the Finance Act 2024 transitional comparison for pre-23 July 2024 art holdings.
See governmentapprovedartvaluer.com for the full art capital gain statutory analysis.
For high-value Indian modernist works, the valuation question can extend across decades — from the original acquisition, through the 1 April 2001 FMV, to the eventual auction or private sale.
The most commercially significant art capital gain context in India is the PAG modernists — Husain, Souza, Raza and Gaitonde — whose works were acquired in the 1970s, 1980s and 1990s at prices far below their current auction values.
Section 55(2)(b) allows the FMV as on 1 April 2001 to substitute as the Cost of Acquisition (CoA). For PAG works, the 2001 market was pre-boom and values were substantially below today’s auction levels, but substantially above many original acquisition prices from the 1980s and 1990s.
The Finance Act 2024 transitional computation compares 12.5% on the current sale price less the 2001 FMV against 20% on the current sale price less the CII-indexed 2001 FMV. For pre-2024 PAG disposals, this comparison becomes a core capital gain tax planning exercise.
The Christie’s 19 March 2025 Husain sale at ₹119 crore represents the current price-ceiling reference for the PAG market. Other significant PAG works command valuations ranging from several crore to tens of crore, making defensible historical valuation evidence increasingly important.