Company Valuations – A Changing Landscape

Most corporates in India carried out company valuations only when regulations mandated it. Thus far, it was mostly only the RBI and SEBI which required company valuations, for exchange control (FEMA) and shareholder protection respectively.

Historically therefore just a handful of companies were impacted. However the regulatory landscape is changing fast. Changes include:

• An increased focus on company valuations in the Indian Income Tax Act, 1961 which routinely undergoes amendments. In the last few years, the Indian Income Tax Act has introduced new clauses taxing the issuer or recipient of shares (or both) depending on the price paid for subscription. A "bargain purchase" attracts capital gains tax and normal income tax for both the buyer and the seller.