The Central Board of Direct Taxes (CBDT) recently released draft rules for valuation of unquoted equity shares for the purposes of section 56 and section 50CA of the Income-tax Act, 1961.
The Finance Act, 2017 has inserted two new sections, i.e s. 56(2)(x) and s. 50CA to the IT Act.
As per the amendment to s. 56, if a person receives jewellery or artistic work or shares and securities for no / inadequate consideration, the fair market value(FMV) of the same is taken into account for computing taxable income under the said clause. Similarly, for immovable property, the stamp duty value is taken into consideration for determining taxability under the same section. However when these assets are received as underlying assets of unquoted equity shares of company, the book value (and not the FMV / stamp duty value) is taken into consideration for determining the value of such shares.
Similarly, the new section 50CA provides that where consideration for transfer of unquoted equity share of a company is less than the FMV of such share determined in accordance with the prescribed manner, the FMV shall be deemed to be the full value of consideration for the purposes of computing income under the head “Capital gains”.
In this regard, the new rules has been introduced by the Board, which is available in its official website. The stakeholders are requested to send their comments/suggestions on the draft notification by 19th May, 2017 to the e-mail address (dirtpl2@nic.in).
Read the full text of the draft below.
