START UP has no tax on issuing shares above market value
CBDT has notified the Tax Exemption to the Start ups on issuing shares above market value as per the Notification Enclosed.
Issuing shares above market value is taxable as per Section 56(2)(viib) of the Income tax act. But the central government can exempt certain classes from tax under Section 56(2)(viib) by Notification.
As per Section 56 (2) (viib) of the Income Tax Act ,the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely
(viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares:
Provided that this clause shall not apply where the consideration for issue of shares is received—
(i) by a venture capital undertaking from a venture capital company or a venture capital fund; or
(ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf.