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Querist : Anonymous

Querist : Anonymous (Querist)

30 December 2013 If a private limited company has a authorized capital of 110000(11000@10), Paid up capital of 100000.It issues balance 10000 to the investor who wants to invest in the company.But the investor is ready to invest 10000000.
1) Can the company issue balance 10000(1000@10) capital to investor and take rest of the money as security premium?
2)Is there any complication under income tax act which has to be followed?
3)Procedure under companies Act to be followed?

Sanket Shah

Sanket Shah (Expert)

30 December 2013 As far as the Company Law is concerned the Share premium may not be the bigger restriction. You may file the details along with Form No 2 while allotting the shares.

But as per new Income Tax provision, the share premium will be treated as an income for the company and the same would be chargeable to tax to the company. Kindly be careful.

Querist : Anonymous

Querist : Anonymous (Querist)

30 December 2013 Under which section of income tax , will ie be taxable?

Sanket Shah

Sanket Shah (Expert)

30 December 2013 SECTION 56(2) provides for the specific category of incomes that shall be chargeable to income-tax under the head Income from other sources.

The provision has been amended to provide for the taxability of the share premium received by the assessee in excess of the fair market value by treating this difference as income of the assessee. The amendment has been proposed by substituting clause (e) in section 56(2).

This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.

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Querist : Anonymous

Querist : Anonymous (Querist)

30 December 2013 Section 56(2) is relating to dividend.
When did it talked about security premium?