Subscription shares issued at premium
This query is : Resolved
Vaibhav Shah
(Querist)
09 September 2013
can subscription shares be subscribed at premium at the time of incorporation of the company..
Ankur Garg
(Expert)
09 September 2013
No I do not think it is possible.
Wait for the opinion of other experts....
Regards
Wait for the opinion of other experts....
Regards
Ajay Mishra
(Expert)
09 September 2013
The premium provisions will always apply after the incorporation of the company. The premium is derived on the basis of valuation under different method. And at the time of incorporation it is not possible.
10 September 2013
I agree with expert Ankur.
As per Section 56(2)(viib) of the Income-tax Act, 1961; any company issuing shares to a resident at price higher than the fair value (as computed in accordance with Rule 11U and 11UA of the Income-tax Rules 1962) would be subject to tax in India on the amount of premium received in excess of the fair value of such shares. For example -
Face Value of Shares - 10
Fair Value of Shares - 15
Issue Price of Shares - 20
Considering the provisions in above example Rs.5 will be subject to tax under Section 56(2)(viib).
As per Section 56(2)(viib) of the Income-tax Act, 1961; any company issuing shares to a resident at price higher than the fair value (as computed in accordance with Rule 11U and 11UA of the Income-tax Rules 1962) would be subject to tax in India on the amount of premium received in excess of the fair value of such shares. For example -
Face Value of Shares - 10
Fair Value of Shares - 15
Issue Price of Shares - 20
Considering the provisions in above example Rs.5 will be subject to tax under Section 56(2)(viib).
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