Purchase of shares by Group Company duly held by foreign entity

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yogesh vijaykumar shah (Querist)
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16 June 2023 Foreign Collaborators held shares of Indian Private Limited Company. having 40% stake. Suppose, the group company purchased / acquired these shares. What will be tax implications from seller (Collaborators) and Purchasing company point of view. Kindly advise us with necessary sections under India income tax law.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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16 June 2023 Since the unlisted share is a long-term capital asset, the gains would be taxed at the rate of 20 per cent with the benefits of indexation. The rate of 10 per cent for long-term capital gains in excess of Rs 1,00,000 shall not apply since securities transaction tax is not paid at the time of both purchase and sale.
In case of transfer of shares of unquoted equity shares under section 56(2)(x) of IT Act, the fair market value of unquoted equity shares shall be determined as per formula given in Rule 11(UA)(1)((c)(b). There is no need to obtain any report from merchant banker or an accountant in respect of such valuation.

See the link for more information.
https://taxguru.in/income-tax/valuation-unquoted-equity-shares-income-tax-case-transfer-shares-shares-issued-company-premium.html

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