Share issue by unlised company
This query is : Resolved
25 March 2025
Hi All
If existing private company issue shares at face value (even though FMV is higher than FV), what are the income tax implications of the same in the hands of transferor and transferee?
Thanks in advance.
If existing private company issue shares at face value (even though FMV is higher than FV), what are the income tax implications of the same in the hands of transferor and transferee?
Thanks in advance.
25 March 2025
For transferor it may not be taxed if first issue, but for transferee the tax on difference value will be liable under sec. 56(2) IT act.
26 March 2025
Hi
As you have mentioned that it is the existing pvt ltd Company ( its not an issue at the time of incorporation) , if the shares are issued at a price less than the FMV, there will be no tax implications in the hands of the company.
But in the hands of the transferee, the difference between the FMV and the issue price will be taxed under Income from Other Sources under Section 56(2)(x) of the Income Tax Act at the applicable slab rate.
As you have mentioned that it is the existing pvt ltd Company ( its not an issue at the time of incorporation) , if the shares are issued at a price less than the FMV, there will be no tax implications in the hands of the company.
But in the hands of the transferee, the difference between the FMV and the issue price will be taxed under Income from Other Sources under Section 56(2)(x) of the Income Tax Act at the applicable slab rate.
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