Skip to main content

Section 56(2)(viib) - Issuance of shares at a price higher than its Fair Market Value ("FMV")

 

Issuance of shares at a price higher than its Fair Market Value 

Money is important for getting the business up and running, the importance of money in business cannot be exaggerated. Until the company is profitable, it is highly dependent on funding for its day-to-day operations.

Private Companies usually raise funds by way of issuance of shares or by availing financial assistance in the form of debt. It is important for corporates to comply with the provisions of Sec 42, Sec 62 and the rules made thereunder before issuing shares. Further, it is also important to ensure compliance with the provisions contained under Section 56(2)(viib) of the Income Tax Act, 1961.

Section 56(2)(viib) states that in case a company in which the public is not substantially interested issues shares at a price greater than the face value of such shares and the aggregate consideration received from a resident person for such shares exceeds their Fair Market Value, then the amount received in excess of Fair Market Value shall be taxed under the head Income from other sources.




Kind Attention: The information provided herein is for education purpose only and the author assumes no responsibility or liability for any errors or omissions in the content.




 




Comments

Post a Comment

Popular posts from this blog

Procedure for change of name of a Company as per the provisions of Companies Act, 2013

Many a time management of the Company may decide to change the name of the Company which may be due to various reasons like change of the objects of the Company, re-branding, conversion from Private to Public Limited or otherwise.   Given below is the procedure to change the name of a Company: 1)     Call a meeting of the Board of Directors of the Company by giving a notice of not less than 7 Days or a shorter notice may also be given as per the provisions of the Companies Act, 2013; Note: The resolution for considering the change of name may be approved through circulation. 2)    Hold the Board Meeting and get the resolution for change of name approved by the Board of the Company;   3)     Apply for the new name of the Company through RUN Service of MCA along with the following attachments: a)     Copy of the Board resolution as approved by the Board for change of name; b)     NOC from the trademark holder ...
Post a Comment
Read more

Payment of Stamp Duty on Share Certificates in Gurgaon, Haryana.

  Procedure for payment of Stamp Duty in Haryana: 1. Preparation of relevant documents: As a first step, the Company should prepare the following documents for submission to the authority:  Application along with INR 10 Court Fee Stamp; Copy of Share Certificates; Certified copy of Board Resolution; Certified Copy of PAN Card of the Company; Copy of Memorandum and Articles of Association of the Company; Copy of Form PAS-3, as filed with Registrar of Companies; List of Directors of the Company; List of Share Certificate Holders of the Company; Authority Letter in favour of Company Secretary/ Chartered Accountant for submission of documents to the authority. Note: It should further be noted that Every page of above documents should be signed by a Director of the Company and should also be stamped with the Company Stamp. 2. Submission of documents to the “Revenue Department”, Haryana. All the above documents shall thereafter be submitted to the Revenue...
Post a Comment
Read more

Legal Entity Identifier l LEI l Change in authorized official/authorized signatory on LEI Portal l Letter of Authority for Legal Entity Identifier l

Ever wondered how can you change the authorized signatory/authorized official on the website of the Legal Entity Identifier India Limited.  It is a general practice to authorize the employees of the company to undertake various statutory registrations and compliances. However, companies often feel stuck when their authorized employees leave the organization.  In today's blog, we will help you with the procedure to change the authorized signatory/authorized official of the company on the LEI Portal.  1) Board's Authorization The first and foremost step for changing the authorized signatory is to get the approval of the board for revoking the authorization granted to the existing employee (who is leaving the organization) and to authorize another official in this regard. This can be done in a duly convened board meeting or by way of a circular resolution. 2) Execution of Letter of Authority Once the board has authorized another official of the company, a "Letter of Authorit...
1 comment
Read more