The Central Board of Direct Taxes (CBDT) has today notified the Income Tax (6th Amendment Rules) wherein it is provided that only Merchant Bankers are entitled to do Valuation of Unquoted Shares and the Chartered Accountants are no more eligible to do so.
Presently, the fair market value of the unlisted equity share is calculated at the option of the company either on the book value on the valuation date or as per discounted free cash flow method calculated by a Merchant Banker or a Chartered Accountant.
The amendment to Rule 11UA has removed a Chartered Accountant from the list of authorized professional who can calculate the fair market value of the shares. Consequently, all valuations of unlisted equity shares on or after May 24, 2018 shall be done only by a Merchant Banker.
This change has been made to bring this provision at par with Rule 3, which allows only Merchant Banker to calculate the value of unlisted shares issued to the employees under the ESOP Schemes.
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