Inviting comments on the draft rule 11UA for implementing the amendment made by the Finance Act, 2023- reg.
Clause (viib) of sub-section (2) of section 56 of the Income-tax Act, 1961 (the Act), prior to amendment vide Finance Act 2023, inter alia, provided that where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the fair market value of the shares, it shall be chargeable to income-tax under the head ‘Income from other sources’ . Rule 11UA of the Income-tax Rules, 1962 (the Rules) provides the method for computation of the fair market value of unquoted equity shares for the purposes of the Clause (viib) of sub-section (2) of section 56 of the Act.
- In the Finance Act, 2023, an amendment was introduced in this provision to bring the consideration received from non-residents within the ambit of Clause (viib) of sub-section (2) of section 56 of the Income-tax Act, 1961.
- As a result of the above amendment, representations were received from various stakeholders raising their concerns that genuine non-resident investors may have to face undue hardship in matters related to valuation of shares etc. In view of this, rule 11UA of the Rules is proposed to be amended.
- The draft notification with proposed amendment to rule 11UA of the Rules is enclosed. It is requested that all the stakeholders as well as the general public may provide suggestions/ comments on the same and send them at the email address ustpI2@nic.in latest by 5th June, 2023.
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