XYZ PVT. LTD. Its shares are held by ABC Ltd. (50% holding) and DEF Ltd. (50%).
Does ABC LTD. DEF LTD. needs to transfer its share at Fair Market Value?
PLz help with the Provisions if any.
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Section 56
Replies (3)
Section 56(2)(viib) of IT Act provides that if a company issues shares at premium at a price higher than fair market value, same will be chargeable to tax as other income. It applies to issue of shares by a company and not to transfer of shares.
what if the shares are issued at discount?
for example Rs. 100,000,000 (ten crores) being issued at RS. 1,000,000(ten lakh).
You can issue a discount also. But in that case cost of acquisition for the buyer will be less and there will be more capital gain when shares are sold.
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