Section 50CA-Deemed FMV for transfer of unquoted shares for computing income under the head Capital gains

Section 50CA-Deemed FMV for transfer of unquoted shares. FMV to be deemed full value of consideration for computing income under the head Capital gains

Budget 2017-18 : Fair Market Value to be full value of consideration in certain cases

Under the existing provisions of the Act, income chargeable under the head “Capital gains” is computed by taking into account the amount of full value of consideration received or accrued on transfer of a capital asset. In order to ensure that the full value of consideration is not understated, the Act also contained provisions for deeming of full value of consideration in certain cases such as deeming of stamp duty value as full value of consideration for transfer of immovable property in certain cases.

In order to rationalise the provisions relating to deeming of full value of consideration for computation of income under the head “capital gains”, it is proposed to insert a new section 50CA to provide that where consideration for transfer of share of a company (other than quoted share) is less than the Fair Market Value (FMV) of such share determined in accordance with the prescribed manner, the FMV shall be deemed to be the full value of consideration for the purposes of computing income under the head “Capital gains”.

This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years.