Rule 11UA of the Income Tax Rules 1962

Last updated: 26 September 2023

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The Central Board of Direct Taxes has issued amendments to Rule 11UA of the Income Tax Rules, 1962, effective from its publication date. These changes specifically address the determination of the fair market value of unquoted equity shares for transactions involving residents and non-residents. The amended rules provide options for assessees to determine this value based on various sub-clauses.

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 25th September, 2023
INCOME-TAX

G.S.R. 685(E) .— In exercise of the powers conferred by sub-clause (i) of clause (a) of the Explanation to clause (viib) of sub-section (2) of section 56 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:‒

1. Short title and commencement.– (1) These rules may be called the Income-tax (Twenty first Amendment), Rules, 2023.

(2) They shall come into force from the date of publication of the notification in the Official Gazette,

2. In the Income-tax Rules, 1962, in rule 11UA, for sub-rule

(2), the following sub-rules shall be substituted, namely:– ‘(2) Notwithstanding anything contained in sub-clause (b) or sub-clause (c), as the case may be, of clause (c) of sub-rule (1):–

(A) the fair market value of unquoted equity shares for the purposes of sub-clause (i) of clause (a) of the Explanation to clause (viib) of sub-section (2) of section 56 shall be the value, on the valuation date, of such unquoted equity shares, as shall be determined under sub-clause (a), sub-clause (b), sub-clause (c) or subclause (e), at the option of the assessee, where the consideration received by the assessee is from a resident ; and under sub-clauses (a) to (e) at the option of the assessee, where the consideration received by the assessee is from a non-resident, in the following manner:-

(a) the fair market value of unquoted equity shares =(A–L)× [PV/PE], where,

For full notification please refer to the attachment

FAQ :

The notification amends Rule 11UA of the Income Tax Rules, 1962, to further define how the fair market value of unquoted equity shares is determined for specific tax purposes.

These rules come into force from the date of their publication in the Official Gazette.

For transactions where the consideration is received from a resident, the fair market value can be determined under sub-clauses (a), (b), (c), or (e) of the rule, at the option of the assessee.

For transactions where the consideration is received from a non-resident, the fair market value can be determined under sub-clauses (a) to (e) of the rule, at the option of the assessee.

Sub-rule (2) of Rule 11UA has been substituted with new provisions concerning the fair market value of unquoted equity shares.

Notification No : 81 /2023
Source : https://egazette.gov.in/WriteReadData/2023/248994.pdf

Attached File : 322600_11181_full_notification.pdf

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