I-T exemption on buying shares at discounted price in firms under insolvency proceedings
NEW DELHI: In order to attract more investors, the government has announced exemption inincome tax for purchase of shares at rates lower than the market price in companies undergoing insolvency proceedings or whose board has been taken over by the government.
The move is likely to help companies like Yes Bank, IL&FS or those who are undergoing insolvency proceedings. According to a Central Board of Direct Taxes (CBDT) notification, the exemptions would come into effect from April 1, 2020, and shall be applicable for the assessment year 2020-21 and thereafter.
In a separate notification, the government has allowed for tax exemption to people receiving property in unregularised colonies, which are now regularised. The I-T exemption has been given on any movable property, being unquoted shares, of a company and its subsidiary received by a shareholder, where, the tribunal on an application moved by the central government has suspended the board of directors of such company and has appointed new directors and where the resolution plan has been approved by the tribunal.
Nangia Andersen LLP Partner Suraj Nangia said as per I-T Act, in case shares of a company are received for a consideration less than its fair market value, then shareholder is required to pay tax on such discount.