Income tax on shares issued at premium by a pvt ltd company

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Rupinder Singh (Querist)
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22 October 2016 Dear Sir / Maam,

Can a Pvt Ltd Company issue its shares at Premium to Its directors , if yes, Whether the Premium amount will be taxable under Income tax act, 1956 ?.

Thanks and Regards

Rupinder Singh

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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22 October 2016 Yes. Please see section 56(2)(viib) of the Income tax Act,1961.

Thrissurkkaran Ishtan

Thrissurkkaran Ishtan (Expert)
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23 October 2016 After Introduction of Section 56(2)(viib), this could be taxable if the share premium is excess of Fair Market Value. This section was introduced to prevent black money being converted into white. So If it is a genuine transaction, there could be no a problem as long as you can prove that the value including premium is FMV. There may be questions raised on the source of money on the Directors as well.

Thrissurkkaran Ishtan

Thrissurkkaran Ishtan (Expert)
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23 October 2016 Check this link also https://www.caquery.com/black-money/

Thrissurkkaran Ishtan

Thrissurkkaran Ishtan (Expert)
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23 October 2016 https://icaiahmedabad.com/TAXABILITY-UNDER-IFOS-UNDER-SECTION-56-2-vii-FINAL.pdf

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