Buying or selling equity shares in India is covered by multiple
laws – the Companies Act 2013, SEBI regulations, FEMA
regulations, anti-competitive law (on occasion). Income tax,
however, is usually applicable irrespective of the circumstances of
the transaction. In equity share transactions, most buyers assume
that tax valuations are required for capital gains, but miss the
fact that tax under the head "other income" may be
triggered. Tax valuations are actually required frequently, in
order to support the buyer and seller's position to the tax
authorities.
Tax valuations and Capital Gains tax
The understanding of tax valuations and capital gains tax is
fairly straightforward. Section 45 covers all capital assets that
may be sold (thereby including shares in a company, whether listed
or unlisted). Section 48 provides the mode of computation of
capital gains, stating that:
