New equity investment treatment in company

This query is : Resolved

Pradeep sen (Querist)
Follow

11 March 2023 now a days everyone talks about sharktank
my query is related to this
suppose a person invested 1 crore for 1% equity in ABC pvt ltd.
the existing authorised capital of the company is Rs.10Lacs equally holded by A & B. i.e. 50000 shares of Rs.10 each by both of them.
1. what will be the treatment of that equity investment.
2. impact on authorised capital of the company.
3. what will be the capital structure of company.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

11 March 2023 1 Treat one lakh as capital and balance 99 lakhs as share premium.
2 Reduce share capital of existing share holders by one lakh.
3 As stated above.

Message likes : 1 times

Pradeep sen

Pradeep sen (Querist)
Follow

12 March 2023 Sir, is there any restriction or limit on share premium amount.
1% of existing share capital will be Rs.10000.00 in this case.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

12 March 2023 Yes, Provisions of Section 56(2)(viib) says that when a private limited company issues share at a price which is more than its Face Value then consideration receives in excess of Fair Market Value (FMV) is taxable under the head “Income From Other Source”.
Agreed Rs 10000

Pradeep sen

Pradeep sen (Querist)
Follow

13 March 2023 amount received in excess of face value can be taxable under Section 56(2)(viib) in income tax act.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

13 March 2023 No, amount received in excess of Fair Market Value (FMV) is taxable under the head “Income From Other Source”.

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