Section 56(2)(viib) Taxes Share Premiums for Closely Held Companies, Excludes Venture Capital, Ends April 2025
Section 56(2)(viib) of the Income Tax Act addresses the taxation of share premium received by closely held companies. If a company, not being a public company, receives consideration exceeding the share's face value, the excess is taxable as income from other sources. The fair market value (FMV) is determined by prescribed methods or substantiated by the company's assets. Exceptions include shares issued to venture capital entities, certain government-notified classes, or non-residents, as these are regulated by SEBI or FEMA. The section will not apply from April 1, 2025, as per the Finance Act, 2024.
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