Quick Summary
CBDT proposes changes to Rule 11UA in respect of ANGEL TAX- Also proposes to notify Excluded Entities In the Finance Act, 2023, an amendment has been introduced to bring the consideration received from non-residents for issue of shares within the ambit of section 56(2)(viib) of the Income-tax Act
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FAQ :
The proposed changes aim to modify the valuation methods for shares issued to non-residents under the 'angel tax' provisions (Section 56(2)(viib) of the Income-tax Act) and to notify certain entities that will be excluded from these provisions.
Currently, Rule 11UA prescribes DCF and NAV methods for resident investors. The proposal is to include five additional valuation methods for non-resident investors, in addition to DCF and NAV.
A safe harbour of 10% variation in value is proposed to account for fluctuations in forex, bidding processes, and other economic indicators that might affect the valuation of unquoted equity shares during multiple investment rounds.
Excluded entities include government and government-related investors (like central banks, sovereign wealth funds), banks or insurance entities subject to regulation, and certain robustly regulated entities like SEBI-registered Category-I FPIs, endowment funds, pension funds, and broad-based pooled investment vehicles with over 50 investors.
Yes, it is proposed to modify an existing notification so that the angel tax provisions shall not apply to consideration received by start-ups covered under specific notifications from the Ministry of Commerce and Industry.
The draft rules will be shared for public comments for a period of 10 days.
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