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.