Capital surplus is taxable or not

This discussion clarifies whether capital surplus generated from issuing shares above par value is taxable for a private limited company in the UK. According to the Income Tax Act 1961, if a closely held company issues shares at a price exceeding their fair market value, the difference is taxable under the Income from Other Sources (IFOS) head in the company's hands. This is governed by Section 56, with share valuation typically performed by a merchant banker.