The Finance Act, 2023 extended the applicability of Section
56(2)(viib) of the Income-tax Act, 1961 (the Act) even to the
consideration received from non-residents in excess of Fair Market
Value (FMV) for issuance of shares of unlisted companies. This is
commonly referred to as 'Angel Tax.'
Pursuant to the amendment, the Central Board of Direct Taxes
(CBDT) earlier released a press release1 followed by
draft Rules2 for public consultation proposing several
changes to the valuation mechanisms and related provisions as laid
down under Rule 11UA of the Income-tax Rules, 1962 (Rules), which
we have summarized here.
Post public comments, the CBDT has notified3 the
Income-tax (Twenty-First Amendment) Rules, 2023, amending Rule
11UA.
