Tax on Income from other sources,gift tax, angel tax

Valuing Private Company
Section 56(2)(viib), also called the ‘Angel Tax’, is a tax levied by the government on any private company that raises capital above its fair-market value. The difference between this FMV and the price at which the shares are issued are taxed in their hands at the maximum marginal rate. The concept of taxing capital receipts and investments as income is unique in the principle of taxation and exists only in India in this clause.
Though the law offers the choice of valuation to the assessee company, what we’re witnessing is the asessing officers disregarding this freedom and instead taking it upon themselves to value the company. These officers ignore the valuation report prepared by a merchant banker or a chartered accountant in favour of the current net worth of the company.

Source of Investment
To establish the creditworthiness of the investor (Section 68), the assessing officers are demanding the bank statements, income tax returns and financial statements of all the investors from these companies.
Given the sensitive nature of these documents, not every investor feels comfortable sharing them with their investee company.
In spite of the tax department having these documents on record, which can be accessed by them via the investor’s Permanent Account Number, these heavy demands are made of the companies with a very narrow compliance timeframe.


Taxable gift
·         Amount received When any amount received exceeds Rs 50000 (from other than specified relatives) than whole received amount will be taxable or
·         Any immovable property is received without consideration if stamp duty value of such property is more than Rs.50000/- than stamp duty value of such property will be taxable.
·         If any immovable property is received for a inadequate consideration, (means consideration is less than stamp duty value of property) which stamp duty value exceeding Rs.50, 000, the stamp duty value of such property as Exceeds such consideration will be chargeable.
However wef A.y 2019-20, the above provision has been amended which is as follows:U/s 562(x)
If any immovable property is received for a consideration , the stamp duty value of which exceeds  105 percent of the consideration and the difference between stamp duty and consideration exceeds Rs 50000, than the difference amount between stamp duty and consideration  shall be taxable as income from other source.
It should be noted that, that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes provided that the the amount of consideration for the said immovable property , or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property.
Movable property is received without consideration which aggregate fair market value is more than Rs.50000/- than tax will be charge on aggregate fair market value of movable property.
If movable property received for a lesser consideration, means consideration is less than the Fair market value but Fair market value exceeds by Rs.50, 000, than the fmv as exceeds such consideration will be chargeable to tax.
For example if Gold Jewellery Rs 1050000 received for consideration 200000 than whole 850000 will be taxable in the hand of recipient.

Foreign Remittance requirements in India

Change of Procerss-Foreign Remittance-online Submission of Form A2  

Ther are major changes in rules relating to furnishing of Information in respect of payment to the Non -Resident with effect from 01.04.2016.
For remittances abroad, you might be required to furnish information in the four forms:
1. Form A2 (Required as per FEMA)
2. Application cum Declaration for purchase of foreign exchange under LRS (Required as per FEMA)
3. Form 15 CA (Required as per Income Tax Act)
4. Form 15 CB (Required as per Income Tax Act)
Your remittances to non-residents abroad will be governed by FEMA (Foreign Exchange Management Act). Additionally, the authorized dealer banks need to ensure that your remittance is in compliance with the Income Tax laws i.e. tax has been duly paid on the funds being remitted and TDS, if any has been deducted.
Further, Remittances under LRS do not require RBI approval. RBI has delegated the power to Authorized dealer banks. Authorized dealer bank has to satisfy itself that the remittance/drawal of foreign currency is not in contravention of FEMA or Income Tax Act.
  • For compliance with FEMA, it may rely on Form A2 and declaration under LRS.
  • For compliance with Income Tax Act, it will rely on Form 15 CA and Form 15 CB, if required.
Earlier, Form A2 was submitted manually with the Authorized dealer bank along with other requisite documents. Now, it will be submitted online along with 
applicable purpose code (Refer the attached Circular for code list).

Changes in Furnishing Form A2 for Foreign Remittances w.e.f. 01.04.2016:

  • Authorized dealer banks, offering internet banking facility to their customers allow online submission of Form A2 (Application for Remittance Abroad) and also enable uploading/submission of documents, if any. Therefore it is mandatory to file online Form A2.The application cum declaration for purchase of foreign exchange under the Liberalized Remittance Scheme (LRS) of USD 250,000 has been clubbed with Form A2.Form A2 will be submitted to the Authorized dealer bank mentioning the Purpose Code for the remittance