Gyaanleikh

 Table of Content Taxability of excess consideration received on shares issued at a premium Exemption to a start-up company Who should be considered as a start-up? Exemption for the purpose of clause (viib) of sub-section (2) of section 56 of the Act Section 56 (2(viib)) doesn’t apply in this case. In the light of the above, the following procedure is laid down with regard to the assessment of such startup entities involving the issue of section 56(2)(viib). 1.Taxability of excess consideration received on shares issued at a premium Link/Source Any excess premium received by a company is chargeable to tax under the head income from other sources if the following conditions are satisfied: (a) Shares (equity or preference shares) are issued by a closely held company; (b) The consideration for the issue of shares is received from any person (resident or nonresident); (c) The consideration received for the issue of shares exceeds the face value and fair market value of shares. If the a...

Section 56- Income from other sources  56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head “Income from other sources”, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”. Section 56 (2 (viib))-  Concerned Section extract- (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: Provided that this clause shall not apply where the consideration for issue of shares is...

 Valuation in India  Valuation Methods  Valuation is a necessary and no so necessary thing. It totally depend on the situation the company is in. You may not know this, but most the valuation is done for internal management needs. But yes valuation is seen in IPO and Other Equity related activities being conducted by the company. In this blog we will understand who is eligible to do valuation according to Income Tax Act, 1961 and further amendments. There are three methods of valuation- Net Asset Value  Discounted Cash Flow  Market Comparison According to Rule 11UA of IT Act 1961, Net Asset Value that is 'NAV' can be done by a Accountant or a Merchant Banker and the methodology and format are very clearly given by the Income Tax Department of India. Whereas Discounted Cash Flow that is 'DCF' can only be done by a Merchant Banker who will adapt the best methodology known to him/her. NAV is quite a stiff but easy valuation methodology and is very well dependent on...