Transfer of Share of private limited company by one individual to another. Whether valuation can be done by ca under rule 11ua of income tax act. Whether share transfer can be done back dated as on 31st January 2019.whether consideration should be received on or before the date of transfer.
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Hello,
CA report is not valid now under section 11UA of the Income Tax Act.
This has been amended vide Notification No. 23/2018-Income Tax dated 24 May 2018 by CBDT which states as follows:
‘2. In the Income-tax Rules, 1962 (hereinafter referred to as the principal rules), in rule 11U, clause (a) shall be omitted.
3. In the principal rules, in rule 11UA, in sub-rule (2), in clause (b), the words “or an accountant” shall be omitted.’
Regards
Sale consideration" that seller receives from the buyer is at least equal to or more than the "Fair Market Value" ("FMV") as defined under Rule 11UA of The Income Tax Rules, of the shares sought to be transferred.
As defined under Rule 11UA, the fair market value ofunquoted equity shares shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner under (a) or (b), at the option of the assessee
2) option A The fair market value of unquoted equity shares shall be calculated simply by ascertaining "Book value of Assets (Less) Book value of Liabilities."
3)
Option (b):
The fair market value of the unquoted equity shares as determined by a Merchant B anker as per Discounted Free Cash Flow Method.
4) only Merchant Banker is authorised to determine the FMV of such equity shares.under option b and not CA
Dear Sir,
Valuation of shares is the process of knowing the value of companys shares.Share valuation is done based on quantitative techniques and share value will vary depending on the market demand and supply. The share price of the listed companies which are traded publicly can be known easily
The said report is invalid as per the Notification No. 23/2018-Income Tax dated 24 May 2018 by CBDT
. In the principal rules, in rule 11UA, in sub-rule (2), in clause (b), the words “or an accountant” shall be omitted.’
The word accountant has been omitted under Rule 11U and Rule 11UA(2)(b) which implies that for the purpose of section 56(2)(viib), in case of shares other than equity shares, the fair valuation certified by only merchant bankers will be valid after the date of publishing of such notification.
Consideration can be paid on/before/after transfer. Back date trasfer will be fraud. Fair market value will calculate by given formula under the act. Income-tax Department had prescribed a specific formula based on “Net Asset Value Approach.
CA valuation report now not valid but merchant bankers.
Valuation of Shares is not a science and hence determining the fair market value (FMV) of shares can be challenging particularly in case of unquoted equity shares. To deal with
this, the Income-tax Department had prescribed a specific formula based on “Net Asset Value Approach” under rule 11UA of the Income Tax Rules, 1962.
The Central Board of Direct Taxes (‘CBDT’) has, vide Notification No. 620 dated 12.07.2017, notified the muchawaited amended Rule-11UA providing for rules for valuation of unquoted equity shares relevant for section 56(2)(x) and also, inserted new Rule-11UAA providing for rules for determination of Fair Market Value (‘FMV’) for
unquoted shares relevant for section 50CA of the Income tax Act, 1961.
You can discuss with your CA about it and other issues at length.
