In a major relief to Start-ups, the Central Board of Direct Taxes (CBDT) has notified that Income Tax not payable on issuing share capital at excess premium by eligible start-ups.
Section 56(2)(viib) provides that when a closely held company (Pvt. Companies, Start-ups, etc.) issues shares at premium, which exceeds the fair market value of the shares, the excess consideration is taxable in the hands of the company.
Exemption has been provided to certain companies from levy of tax on the excess securities premium if consideration for the shares is paid by the Venture Capital Undertaking or a Venture Capital Fund or such other company as may be notified under Section 56(2)(vii) of the Income Tax Act. Now the exemption has been extended to the start-ups.
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