Fair market value of unquoted shares

Current financial Act 2017 has insert a new section of 50CA of Income Tax Act for the determined fair market value of unquoted share, the FMV shall be deemed to be the full value of the consideration for the purposes of computing income under the head "Capital gains".

This new section stipulates that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being share of a company other than a quoted share, is less than the fair market value of such share determined in such manner as may be prescribed, the value so determined shall, for the purposes of capital gains, be deemed to be the full value of consideration received or accruing as a result of such transfer.

Quote share means the share quoted on any recognized stock exchange with regularity from time to time, where the quotation of such share is based on current transaction made in the ordinary course of business.

Similarly, Finance Act, 2017 had inserted clause (x) to Sec. 56(2) so as to widen the scope of taxability of receipt of sum of money or property without/inadequate consideration. Under the said clause read with Rule 11UA of the Income-tax Rules, 1962 ('the Rules') 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.

Thus the above scenario of Section 56(2) of Income Tax Act stipulate that where any person receives from any person or persons on or after the 1st day of April, 2017, any money, immovable property and stamp duty without consideration, the aggregate value of which exceeds fifty thousand rupees, than the fair market value (FMV) of the same is taken into account for computing taxable income.

Where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for computing taxable income.

Disputed stamp duty value: where the stamp duty value of immovable property is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of this sub-clause as they apply for valuation of capital asset under those sections.

Movable Property: any movable property without consideration, the aggregate fair market value of which exceeds fifty thousand rupees than the whole of the aggregate fair market value of such property will consider for the purpose taxability. Consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration will take for the purpose of this clause.