Income Tax News: Now the Income Tax Department can bring new rules to find out the correct market price of shares of unlisted companies. Can issue revised assessment rules under the Income Tax Act. However, no tax will be levied on investments in DPIIT-recognised startups that meet the prescribed criteria.
The Income Tax Department is likely to issue revised valuation rules under the Income Tax Act to ascertain the fair market value (FMV) of shares of unlisted companies for the purpose of taxing non-resident investors.
The Income Tax Department is preparing for this. Giving this information, an official of the Income Tax Department said that the need for this amendment is being felt because the Income Tax Act and the FEMA law have given different methods for calculating the FMV of unlisted companies. Talking to PTI, the official said,
“Rule 11UA of the Income Tax Act will be redrafted keeping in view the concerns of the stakeholders to bring it in line with the Foreign Exchange Management Act (FEMA).” Rule 11UA deals with determination of FMV of property other than immovable property.
Amendment proposed
In the Finance Bill, 2023, amendment has been proposed in section 56(2) of the Income Tax Act. This will bring foreign investment into the tax net in unlisted companies, except startups recognized by the Department for Promotion of Investment and Internal Trade (DPIIT).
No tax on startup
No tax will be levied on investments in startups that are DPIIT-accredited and meet the prescribed criteria, PTI reported. Startups will get a lot of convenience from this. At the same time, according to the current rules, only investments made by domestic investors or residents in companies with centralized control are taxed on the fair market value.
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