Coinmen Consultants LLP : Top Financial & Business Advisory Firm in India
Coinmen Consultants LLP
Alliott Global Alliance
AGA

For

investors

Shares received
at No Cost or at Less
Than FMV

Applicability

Applicable on any person receiving from any person (individual or non-individual; resident or non-resident)

Trigger point

Any person receiving shares or securities
  • Without consideration where FMV exceeds INR 50,000 or
  • At a discount to FMV where the discount exceeds INR 50,000.

Consequences

 

Taxable as income from other sources in the hands of the investor

What is taxable?

  • Where no consideration paid - Entire FMV
  • Where consideration paid - FMV less actual consideration

Determination of FMV (As per 11UA of the IT Rules)

FMV = NAV

Note
Issuance at discount to FMV is restricted under the Indian foreign exchange regulations for FDIs by non-resident investors. However, this section could get triggered in case of resident investors

Capital Gains
on Transfer of Shares

Applicability

Any assessee (individual or non-individual; resident or non-resident) transferring shares other than the ones quoted on any RSE

Trigger point

Investor receives consideration which is less than FMV

Consequences

FMV of the shares shall be deemed to be the sales consideration

Determination of FMV [As per Rule 11UAA read with Rule 11UA]

  • For equity shares - NAV
  • For preference shares - Based on price it would fetch in the open market. Obtain a report from a Merchant Banker or a Chartered Accountant

Such FMV will be determined as on the date of transfer of shares.

Capital Gains
Exemption to Boost Investment
in Startups

Background

To boost the investment in eligible start-ups, a new exemption offered to taxpayers (individual or HUF only) from long-term capital gains arising from the transfer of residential property.

Applicability

  • Available only to individual or HUF + investing in equity shares of an eligible company.
  • Available only on long-term capital gains (net consideration) earned from sale of residential property (house or plot of land).
  • Such net consideration to be utilized on or before the due date of furnishing the ITR.
  • The startup should utilize the subscription amount for procuring new assets (see below) within one year from subscription of shares by the taxpayer.

Lock-in period

  • The investee company cannot sell such new assets and the investor cannot sell the shares of startup company for at least 5 years from the date of respective acquisitions.
  • However, if the new asset comprises of computer or computer software then the lock-in period for the investee company shall be 3 years.

Eligible startup and eligible business

Incorporated in India during the relevant FY in which the capital gain arises to the due date of filing return of income.

  • Engaged in
  • business of manufacture of an article or a thing, or
  • in an eligible business
  • It is a company in which the investor assessee holds > 25% share capital or voting rights after subscription in shares.
  • It is a company which qualifies as an MSME under the MSME Act, 2006 or is an eligible start-up.

New Assets

Means new plant and machinery but does not include:

  • Second-hand plant or machinery used in or outside India
  • Already used plant or machinery by the assessee himself
  • Any office appliances
  • Computer or computer software (unless it is a technology driven startup)
  • Any vehicle