The Central Board of Direct Taxes (CBDT) has come up with the much-awaited final rules for determination of value of unquoted shares in certain cases.
The valuation rules would go a long way in tackling the tax evasion practice adopted by various taxpayers by acquiring immovable properties from transfer of unquoted shares, say tax experts.
It may be recalled that the Union Budget 2017 had widened the scope of taxability on sale of unquoted shares of a company for an inadequate consideration in the hands of the seller. Simultaneously, the Finance Act 2017 had widened the scope of taxability of receipt of property without/ inadequate consideration, creating a dual-tax window for the income tax authorities.
Now, the Finance Ministry has come out with the final rules for determination of value of unquoted shares.
The final rules are in line with the draft rules issued by the CBDT in May 2017, Amit Maheshwari, Partner, Ashok Maheshwary & Co LLP, a CA firm, told BusinessLine .
Rakesh Nangia, Managing Partner, Nangia & Co LLP, a law firm, said the notification of the final rules is one of the major steps taken to tackle a variety of tax planning and tax evasion strategies adopted through transfer of valuable companies by under-pricing their equity shares.
The final rules would dissuade transfer of properties through transfer of shares, which was a rampant practice to avoid stamp duties and capital gains tax, he said.
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