Regulatory Update: The Central Board of Direct Tax - Non-Recovery of Tax Demands From Start-Up Companies Issuing Shares at Premium.

The Income Tax Act, 1961 (the IT Act) mandates the taxation of premium received on issue of shares to resident Indians in excess of Fair Market Value ('FMV') by a company, as income u/s 56(vii) (b) of the Income Tax Act, 1961 in the hands of such company. Tax on the excess money received over and above the FMV was exempted in case if issuer is a start-up company. However, the tax authority continued raise tax demand quoting reason as the abnormal valuation projections etc. The Central Board of Direct Tax has instructed the tax authority that if additions have been made after modifying/rejecting the valuation reports submitted by start-up companies, no coercive measures to recover the tax demand be taken. Further, for all such cases which are pending before the Appellate Authority, necessary administrative steps should be taken for expeditious disposal of appeals, preferably by March 31, 2018.


Similar Articles

Contact us for a Solution

Contact us for more information about our services and how we can help


As per the rules of the Bar Council of India, we are not permitted to advertise or solicit work. By accessing and browsing through this website, all users agree and acknowledge that the content of this website is for informational purposes only and that there has been no form of solicitation, advertisement or inducement by NovoJuris Legal or its members, in any form. No information provided on this website should be construed as legal advice and NovoJuris Legal shall not be liable for consequences of any action taken by relying on the information provided on this website.