Cap gain on startup sale of shares

Save Share

This query is : Resolved

Quick Summary

This discussion examines whether promoters of a private limited startup can sell their shares and avoid capital gains tax. While promoters may wish to recoup investment without immediate tax, the general consensus is that capital gains tax is applicable and unavoidable. Strategies like issuing shares at a premium to existing shareholders were considered, but tax rules for unlisted companies, particularly Section 56(2)(viib), make it difficult to circumvent this tax unless specific investor types are involved.

CA Kunjan - www.canaresh.com

CA Kunjan - www.canaresh.com (Querist)
Follow

25 April 2022 can promoters sell their 50% share in pvt ltd startup without paying cap. gain tax?
Should investor invest directly in pvt ltd company ?
but in this case, promoters cant get back money, right?
promoters dont want salary /remuneration etc.
my view-->unfortunately, there is no way promoters can avoid cap.gain tax
regards, ca kunjan

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

26 April 2022 Capital gains tax applicable on sale by promoters. It can't be avoided. Promoters can get back money on sale.

CA Kunjan - www.canaresh.com

CA Kunjan - www.canaresh.com (Querist)
Follow

02 May 2022 an afterthought--> can company issue shares at premium to existing shareholders? so promoter's cost increases before they sell to new investor. i think its possible... ty sir

CA Kunjan - www.canaresh.com

CA Kunjan - www.canaresh.com (Querist)
Follow

02 May 2022 i just read--> as co is unlisted, premium has to be such that issue price should be above fair value of shares, u/s. 56(2)(Viib)

so prima facie, it seems tuff to avoice cap.gain tax in unlisted co. (unless investor is venture fund or something).

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

02 May 2022 For the old holding earlier cost only will be considered.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now