Time for taxpayers to get ready to provide fair market value of unlisted shares and gains upfront

If you are someone who promote or invest in unicorns or new-age start-up businesses, you can no longer expect making a good margin post exit without paying due taxes.


In its latest edition of the IT return forms, the IT Department of India has introduced new disclosure norms. The main objective behind this is to ensure that promoters and investors report their capital gains from the sale of unlisted shares much more accurately.



According to the new forms, which are applicable for FY18, individual taxpayers need to now provide the fair market value of their unlisted shares in the prescribed manner. Moreover, the full value of consideration either received or receivable with regards to unquoted shares sold by them during the year must be disclosed.


Going forward, the IT department will be putting the onus more on the investors in order to substantiate the correctness of calculation of capital gains made and presented in the ITRs. The investors will have to make note of the fact that this requirement of the IT department may increase the compliance cost for the investors. This is largely because the investors may have to seek help from professional merchant bankers for conducting the valuation.


As per Section 50CA, a new introduced in the Finance Act, 2017, a seller has to compulsorily obtain the fair market value of every unlisted share that is being transferred. In fact, the disclosure of the basis of determination of fair market value of unquoted shares has been made mandatory by the new ITR-2 form. The form requires an investor to provide all the relevant details that will justify the manner in which the capital gains on the sale of unlisted shares have been computed.


In case you require more information on getting a valuation done or want assistance with regards to your promotional stake or investments in start-ups, write us at investmentz@acm.co.in


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