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Chapter No. 04 - Other Sources - Share premium received by closely held company [Sec. 56(2)(viib)]
Shares are issues at premium. The total consideration per share is 40. As fair market value is more than the consideration received, nothing is taxable as per Sec. 56(2)(viib).
If the fair market value is 31, then excess consideration of 9 per share (i.e. 40 – 31) is taxable u/s 56(2)(viib).
Share premium taxation under Section 56(2)(viib): excess consideration over fair market value is taxable on closely held companies. Taxability of share premium for a closely held company turns on whether consideration per share exceeds fair market value; if FMV exceeds consideration (FMV 42, consideration 40) no tax arises, whereas if consideration exceeds FMV (consideration 40, FMV 31) the excess per share (9) is taxable under the provision governing share premium receipts. of Press 'Enter' after typing page number.
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