Share valuation rules under section 56(2)(viia) tax undervalued or gratuitous receipt of non-public company shares. Section 56(2)(viia) [upto 31.03.2017] taxed a firm or a company other than a public company on receipt of shares of a non-public company without consideration, where the aggregate fair market value exceeded 50,000, or at an undervalue exceeding that threshold. The taxable amount was the fair market value of the shares received without consideration, or the excess of fair market value over consideration where consideration was inadequate. The provision excluded certain business reorganisation, amalgamation and demerger transactions, and CBDT Circular No. 10/2018 clarified that it applies to transfers for no or inadequate consideration, not to fresh issuance of shares.
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Share valuation rules under section 56(2)(viia) tax undervalued or gratuitous receipt of non-public company shares.
Section 56(2)(viia) [upto 31.03.2017] taxed a firm or a company other than a public company on receipt of shares of a non-public company without consideration, where the aggregate fair market value exceeded 50,000, or at an undervalue exceeding that threshold. The taxable amount was the fair market value of the shares received without consideration, or the excess of fair market value over consideration where consideration was inadequate. The provision excluded certain business reorganisation, amalgamation and demerger transactions, and CBDT Circular No. 10/2018 clarified that it applies to transfers for no or inadequate consideration, not to fresh issuance of shares.
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