Executive Summary:
This notification from the Central Board of Direct Taxes amends the Income-tax Rules, 1962, regarding the determination of fair market value for unquoted equity shares and shares other than quoted shares. These amendments, introduced as the Income-tax (20th Amendment) Rules, 2017, take effect from April 1, 2018, and apply to the assessment year 2018-19 and subsequent years. It provides a formula for calculating the fair market value of unquoted equity shares.
Key Points / Main Content:
Fair Market Value of Unquoted Equity Shares:
* Rule 11UA of the Income-tax Rules, 1962 is amended.
* A formula is provided to calculate the fair market value of unquoted equity shares: FMV = (A + B + C + D - L) * (PV/PE)
* A = Book value of assets (excluding specific items) less income tax paid and unamortized deferred expenditure.
* B = Open market price of jewellery and artistic work based on valuation report.
* C = Fair market value of shares and securities.
* D = Value adopted/assessed for stamp duty regarding immovable property.
* L = Book value of liabilities (excluding specific items like paid-up capital, reserves, and certain provisions).
* PV = Paid-up value of equity shares.
* PE = Total amount of paid-up equity share capital.
Fair Market Value of Shares Other Than Quoted Shares:
* A new rule 11UAA is inserted to determine the fair market value of shares other than quoted shares for the purposes of section 50CA.
* The fair market value shall be determined as per sub-clause (b) or (c) of clause (c) of sub-rule (1) of rule 11UA.
* The valuation date for determining the fair market value is the date on which the share is transferred.
Impact Analysis
Tax Payers:
Impact: Taxpayers involved in transactions of unquoted equity shares or shares other than quoted shares will be impacted by the new valuation rules for the purpose of calculating income tax.
Action Required: Taxpayers need to use the prescribed formula in Rule 11UA and Rule 11UAA to determine the fair market value of such shares for tax assessment starting from the assessment year 2018-19.
Tax Authorities:
Impact: The Central Board of Direct Taxes (CBDT) is responsible for implementing and enforcing the amended rules.
Action Required: The tax authorities must ensure that the new valuation rules are correctly applied during tax assessments and resolve any disputes arising from the interpretation of these rules.
Registered Valuers:
Impact: Registered valuers will play a key role in providing valuation reports for jewellery and artistic work to determine the fair market value as required by the new rules.
Action Required: Registered valuers must ensure their valuation reports are accurate and compliant with the requirements of the Income-tax Rules, 1962, as amended.
Key Entities Referenced
Income-tax Act, 1961: The primary legislation being amended by this notification.
Central Board of Direct Taxes: The issuing authority for the notification, responsible for direct tax administration.
Income-tax Rules, 1962: The rules that are being amended by this notification.
Ministry of Finance: The government ministry under which the Department of Revenue and the Central Board of Direct Taxes operate.
Department of Revenue: The department within the Ministry of Finance responsible for revenue collection.
Section 50CA: A section of the Income-tax Act, 1961, related to determination of fair market value for share other than quoted share, for the purposes of computation of income tax.
Section 56: A section of the Income-tax Act, 1961 related to Income from other sources.
Section 295: A section of the Income-tax Act, 1961, granting the Central Board of Direct Taxes the power to make rules.
REGD. NO. D. L.-33004/99
EXTRAORDINARY
II— — (i)
PART II—Section 3—Sub-section (i)
PUBLISHED BY AUTHORITY
620]
No. 620] NEW DELHI, WEDNESDAY, JULY 12, 2017/ASADHA 21, 1939
वित्त म्त रालयय
(ररालजस्ि विभरालग)
[केंद्रीयप्रत्य क्ष करबर्ड]
अवधसचू नराल
नईददल्यी,12जुयरालई,2017
आय-कर
सराल.कराल.वन.865(अ).—केंद्रीयप्रत्यक्ष करबर्,ड आय-करअवधवनयम,1961(1961कराल43)कीधरालरराल295के
सरालथपठितधरालरराल56कीउपधरालरराल(2)द्वरालररालप्रदत्त कवतत योंकरालप्रयरगकरते हुए,आय-करवनयम,1962करालऔर
सतकरधनकरनेकेवयए,वनम्नवयवखतवनयमबनरालतरालै, अथरालडत्:--
1.(1)इनवनयमोंकरालसतवक्ष प्त नरालमआय-कर(20िरालत सतकरधन)वनयम,2017ै ।
(2)ये1अप्र य,2018करप्रिृत्तैोंगेऔरवनधरालरड णिर्ड2018-19तथरालपश्च रालत्िती िर्षों केसतबतधमें यरालगू
ैोंगे।
2.आय-करवनयम,1962में,--
(अ)वनयम11पककेउपवनयम(1)केखत्(ग)केउपखत्(ख)केस्थ रालनपर,वनम्नवयवखतउपखत्रखराल
जरालएगराल,अथरालडत्:--
4292 GI/2017 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
"(ख) करटनदकएगएसरालधरालरणकेयरोंकरालउवचतबरालजरालरमूल्य, मूल्यरालतकनतरालरीखकरऐसेकरटन
दकएगएसरालधरालरणकेयरोंकराल ऐसरालबरालजरालरमूल्यैरगराल,वजसकरालअिधरालरणवनम्नवयवखतरीवतसे दकयराल
गयरालै, अथरालडत्:--
करटनदकएगएसरालधरालरणकेयरोंकरालउवचतबरालजरालरमूल्य=(ए +बी+ सी+ ्ी- एय) X
(पीिी)/(पीई)जैरालत,--
ए=वनम्न वयवखतकरघटरालकरतयु नप्मेंकीसभीआवस्त यों(आभूर्ण,कयरालकृवत्त,केयर,
प्रवतभूवतऔरस्थ रालिरसतपवत्तसेवभन)करालबैीमूल्य,--
(i)सतदत्तआय-कर,यददकरईै, कीकरईरकम,घटरालप्रवतदरालयकरालदरालिरालकीगई,यददकरई
ै, आय-करकीरकम;और
(ii) आवस्त केरूपमेंदकरालडईगईकरईरकम,वजसकेअतत गडतआस्थ वगत्ययकीऐसेग र
अपरालकठरतरकम,जरदकसीआवस्त करालमूल्यनै ै ;
बी=ऐसीकीमत,जरआभूर्णऔरकयरालकृवत्त कीआतकीजरालएगी,यददउसकरालरवजस्रीकृत
मूल्यरालतककसेअवभप्ररालप्त मूल्य रालतकनठरपरटडकेआधरालरपरखयु ेबरालजरालरमेंविय कयदकयरालजरालतरालै ;
सी=केयरोंऔरप्रवतभूवतयोंकरालऐसरालउवचतबरालजरालरमूल्य ,जरइसवनयममेंउपबतवधतरीवतसे
अिधरालठरतदकयरालगयरालै ;
्ी=स्थ रालिरसतपवत्तकेसतबधत मेंस्टरालतपकुल्ककरालसतदरालयकरने केप्रयरजनकेवयएसरकरालरकेदकसी
प्ररालवधकरालरीद्वरालररालअतगीकृतयरालवनधरालडठरतयरालवनधरालडरणीयमूल्य ;
एय=तुयनप्मेंदर्शकतदरालवयत्िोंकरालबैीमूल्य, ककतुइसकेअततगडतवनम्नवयवखतरकमेंनै ै,ैं
अथरालडत्:–
(i) सरालधरालरणकेयरोंकेसतबतधमेंसमरालदत्त पूतजी;
(ii)ऐसीरकम,जरऐस े अवधमरालनीकेयरोंऔरसरालधरालरणकेयरोंपरयरालभरालतककरालसतदरालयकरने के
वयएपृथक्रखीगईै, जैरालतऐसरालयरालभरालतक, कतपनीकेसरालधरालरणवनकरालयकेअवधिेकनमेंअततरणकी
तरालरीखसे पूिडघरवर्तनै दकयरालगयरालै ;
(iii)पठरणरालवमकअतकनकरालररालत्मकैरने केबरालिजूदभी,अिक्ष यणकेमद्दे पृथक्रखेगए
आरवक्ष तीऔरअवतकेर्सेवभन्न,आरवक्ष तीऔरअवतकेर्, चरालैे दकसीभीनरालमसेज्ञरालतैर ;
(iv)सतदत्त आय-कर,यददकरईैर,सेवभन,कररालधरालनकेउपबतधकेवयएकरईरकमघटराल
प्रवतदरालयकेरूपमें,यददकरईैर,दरालिरालकीगईआयकरकीरकम,उसकरयरालगूविवधकेअनुसरालर
बैीयरालभकेसतदभडमेंसतदये करसेआवधतय केविस्तरालरतक;II (i) 3
(v) सुवनवित दरालवयत्िोंसेवभन्नदरालवयत्िोंकरपूररालकरनेकेवयएबनरालएगएउपबतधोंसे सतबतवधत
करईरकम;
(vi) सतचयी अवधमरालनी केयरों के सतबध में सतदये यरालभरालतकों के बकरालए से वभन्न, आकवस्म क
दरालवयत्िोंसेसतबतवधतकरईरकम;
पीिी=ऐसेसरालधरालरणकेयरोंकरालसमरालदत्त मूल्य;
पीई=समरालदत्त सरालधरालरणकेयरपूतजीकीकुयरकम,जरतयु नप्मेंदकरालडईगईै ;"
(आ) वनयम11पककेपश्च रालत,् वनम्नवयवखतवनयमअतत:स्थ रालवपतदकयरालजरालएगराल,अथरालडत्:--
"करटदकएगएकये रसे वभन कये रकेउवचतबरालजरालरमल्ू य करालअिधरालरण
11पकक—धरालरराल50गककेप्रयरजनोंकेवयए,दकसीकतपनीकेकरटदकएगएकेयरसे वभनकेयरके
उवचतबरालजरालरमूल्यकरालअिधरालरण,वनयम11पककेउपवनयम(1)केखत्(ग)के,यथरालवस्थवत,उपखत्(ख)यराल
उपखत्(ग)मेंउपबतवधतरीवतसेदकयरालजरालएगरालऔरइसप्रयरजनकेवयए,वनयम11पऔरवनयम11पकमें
मूल्यरालतकनतरालरीखकेप्रवतवनदकश स सेिैतरालरीखअवभप्रेतैरगी,वजसकरऐसीपूतजीआवस्त ,जरधरालरराल50गकमें
वनर्ददष्टकरटदकएगए,केयरसेवभनदकसीकतपनीकरालकये रै, अततठरतकीजरालतीै ।"।
[अवधसूचनरालस.त61/2017/फराल.स.त149/136/2014-टीपीएय]
प्रिीणररालिय, वनदके क(करनीवतऔरविधरालयन)
ठटप्पण:मूयवनयमभरालरतकेररालजप्,असरालधरालरण,भरालगIII,खत्3,उपखत्(i)मेंअवधसूचनरालसतखयरालतककराल.आ.
969(अ),तरालरीख26मरालचड,1962द्वरालररालप्रकरालवकतदकएगएथेऔरअवधसूचनरालसतखयरालतकसराल.कराल.वन.826(अ)
तरालरीख4जुयरालई,2017द्वरालररालअतवतमसतकरधनदकयरालगयरालथराल।
MINISTRY OF FINANCE
(Department of Revenue)
[CENTRAL BOARD OF DIRECT TAXES]
NOTIFICATION
New Delhi, the 12th July, 2017
INCOME-TAX
G.S.R. 865(E).—In exercise of the powers conferred by section 50CA and sub-section (2) of section 56 read
with section 295 of the Income-tax Act, 1961 ( 43 of 1961), the Central Board of Direct Taxes hereby makes the
following rules further to amend the Income-tax Rules, 1962, namely:-
1. (1) These rules may be called the Income-tax (20th Amendment), Rules, 2017.
(2) They shall come into force from the 1st day of April, 2018 and shall apply in relation to assessment
year 2018-19 and subsequent years.
2. In the Income-tax Rules, 1962, —
(A) in rule 11UA, sub-rule (1), in clause (c), for sub-clause(b), the following sub-clause shall be substituted,
namely:-
“(b) the fair market value of unquoted equity shares shall be the value, on the valuation date, of such unquoted
equity shares as determined in the following manner, namely:—4 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
the fair market value of unquoted equity shares =(A+B+C+D - L)× (PV)/(PE), where,
A= book value of all the assets (other than jewellery, artistic work, shares, securities and immovable property) in
the balance-sheet as reduced by,-
(i) any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any; and
(ii) any amount shown as asset including the unamortised amount of deferred expenditure which does not
represent the value of any asset;
B = the price which the jewellery and artistic work would fetch if sold in the open market on the basis of the
valuation report obtained from a registered valuer;
C = fair market value of shares and securities as determined in the manner provided in this rule;
D = the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of
stamp duty in respect of the immovable property;
L= book value of liabilities shown in the balance sheet, but not including the following amounts, namely:—
(i) the paid-up capital in respect of equity shares;
(ii) the amount set apart for payment of dividends on preference shares and equity shares where such
dividends have not been declared before the date of transfer at a general body meeting of the company;
(iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those
set apart towards depreciation;
(iv) any amount representing provision for taxation, other than amount of income-tax paid, if any, less the
amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference
to the book profits in accordance with the law applicable thereto;
(v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities;
(vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of
cumulative preference shares;
PV= the paid up value of such equity shares;
PE = total amount of paid up equity share capital as shown in the balance-sheet;”
(B) after rule 11UA, the following rule shall be inserted, namely:-
“ Determination of Fair Market Value for share other than quoted share.
11UAA. For the purposes of section 50CA, the fair market value of the share of a company other than a quoted
share, shall be determined in the manner provided in sub-clause (b) or sub-clause(c),as the case may be, of
clause (c) of sub-rule (1) of rule 11UA and for this purpose the reference to valuation date in the rule 11U and
rule 11UA shall mean the date on which the capital asset, being share of a company other than a quoted share,
referred to in section 50CA, is transferred.” .
[Notification No. 61 /2017/F. No. 149/136/2014-TPL]
PRAVIN RAWAL, Director (Tax Policy and Legislation)
Note: The principal rules were published in the Gazette of India Extraordinary, part III, section 3, sub-section (i), vide
notification number S.O. 969(E), dated the, 26th March, 1962 and were last amended vide notification number
G.S.R.No.826(E) dated the 4th July, 2017.
Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.