Tax implication of shares sold in premium for pvt ltd

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K.Balaji

Accountant

21 Points Posted on 06 January 2015

Sir

Amount received by the company in the name of perimum what is the treatement under income tax for pvt ltd company

eg: Face value of share is Rs.10 and willing to sell the shares at a permimum of Rs.20/- per share is this money is taxable for the company how the money can be used, wheather MD of the company can use this amount to invest in new pvt com. in his personal name

Replies (2)

Madav

Senior Consultant

141 Points Posted on 06 January 2015

If company is receiving this on account of share issuance than it won't be considered as income , its just a capital receipt and you just need to increase your share capital...but if your MD is selling his shares to someone than it will be treater as capital gain on the hand of your MD.

In the later case MD can use this money to invest in New company...

Raphael

Chartered Accountant

164 Points Posted on 13 January 2015

As per Sec 56(2) (viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares.

Which means if the issue value which includes premium exceeds the fair market value of shares, then the excess value will be chargeable to tax as Income from other source in the hands of the Company.