9911796707
TMI BlogFull value of consideration for transfer of share other than quoted share for computation of Capital Gain - Clause 79 of the Income Tax Bill, 2025 vs Section 50CA of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions aim to ensure that income from capital gains is calculated based on the fair market value of shares, rather than potentially understated transaction values. This commentary provides a comprehensive analysis of these provisions, exploring their objectives, implications, and the nuances involved in their application. Objective and Purpose Both Clause 79 and Section 50CA are designed to prevent tax evasion through the undervaluation of shares in transactions involving unquoted shares. The legislative intent is to ensure that the capital gains tax is levied on a fair market value basis, thus preventing the understatement of income and tax liabilities. Historically, the transfer of unquoted shares posed challenges for tax authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act, 1961 1. Section 50CA Main Provision: Similar to Clause 79(1), Section 50CA mandates that when the consideration for transferring an unquoted share is less than its fair market value, the fair market value is deemed the consideration for capital gains purposes. This ensures consistency in the tax treatment of such transactions, aligning the taxable amount with the economic value of the asset transferred. 2. Proviso to Section 50CA: The proviso introduced through subsequent amendments allows for exemptions similar to those in Clause 79(2). This amendment reflects an understanding of the need for flexibility in tax legislation, accommodating genuine cases where the strict application of the provision may lead to unjust ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance with these provisions by accurately determining and reporting the fair market value of shares. * The potential for exemptions provides relief in genuine cases, but taxpayers must be aware of the specific conditions and classes of persons eligible for such exemptions. 2. Compliance Requirements: * Accurate valuation of unquoted shares is critical, necessitating the involvement of qualified valuers or adherence to prescribed valuation guidelines. * Documentation and record-keeping become essential to substantiate the fair market value and support any claims for exemptions. 3. Regulatory Implications: * Tax authorities must ensure robust mechanisms for monitoring compliance and addressing valuation disputes. * The provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
