Can newly formed private limited company issue share of Rs. 10/- each at premium of Rs. 250/- per share? Company has not started its business. Is there any restriction under Company Law, Income Tax or any other law?
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Restriction on share issued by private company at premium
Replies (5)
There is no restrictions for issue of shares at premium
Pl refer Sec.56(viib) of IT Act read with Rules 11U and 11UA of IT Rules. Consideration in excess of prescribed method will be taxed under the head Income from Other Sources.
Premium received on issue of shares is a capital receipt the usage of which is restricted vide section 78 of the Companies Act, 1956 and can not be taxed under section 56 of the IT Act unless there is a specific provision of chargeability.
Correct me if am wrong
In India anything can happen. We have seen tax on expenses (FBT). There is tax on buy back of shares. There is double tax on dividend. So why not tax on excess premium on shares?
Yes. U are right. Premium will be taxable for companies in which public are not substantially interested. Share premium is will be taxable as other income in this case since its a private limited company.
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