Final Rules prescribing method of valuation of unquoted shares

CBDT has notified amended Rule 11UA prescribing method of valuation of fair market value (‘FMV’) of unquoted equity shares for the purpose of section 56(2)(x) . Section 56(2)(x) provides that where any person received any property without consideration or for a consideration less than FMV then the difference between FMV and consideration paid shall be deemed to be the income of the receiver. As per amended Rule 11UA, valuation of unquoted equity shares is to be done by taking into account the FMV of jewellery, artistic work, shares & securities and stamp duty value in case of immovable property and book value for the rest of the assets as per balance sheet of the company.

Further, CBDT has also notified a new Rule 11UAA for valuation of FMV of unquoted shares for the purposes of 50CA which provides where consideration received for transfer of unquoted share is less than its FMV then such  FMV shall be deemed to be sale consideration. FMV under Rule 11UAA is to be calculated as per valuation methodology provided in Rule 11UA for such unquoted shares.

These Rules shall come into force from 1st April 2018 and shall apply in relation to AY 2018-19 & subsequent years.

To read the text of the notification kindly refer: http://www.incometaxindia.gov.in/communications/notification/notification61_2017.pdf

This entry was posted in Direct Tax. Bookmark the permalink.