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The Finance Ministry has finalised draft norms for computing the fair market value of assets of charitable institutions that convert into for-profit entities.
The fair market value of the total assets of the trust or institution would include the aggregate of the fair market value of all the assets in the balance sheet excluding the tax paid by it.
“Any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset,” would also be excluded from the fair market value, said the draft valuation norms issued by the Central Board of Direct Taxes.
The move comes following a Budget 2016-17 proposal to levy an “exit tax” at the rate of 35 per cent on the accreted income of charitable institutions that cease to exist or become for-profit organisations.
“Accreted income shall be amount of aggregate of total assets as reduced by the liability as on the specified date,” it had said.
The CBDT has also laid out guidelines for valuation of the fair market value of assets including shares and securities and immovable property.
Significantly, the value of bullion, jewellery, precious stone, artistic work owned by the trust or institute would also be taken into account while computing the value of its assets.
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