| Question And Answer | |
|---|---|
| Subject: | Rights Issue of Shares – Tax implication |
| Category: | Income-Tax |
| Querist: | Allwyn |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Right issue |
| Date: | April 1, 2023 |
Dear Experts,
Company A (unlisted company), issues Rights to its existing shareholders in the ration of 5:1. One of the shareholder renounces the Rights in the favour of one of the employees of Company A (at Zero price). The face value of the shares is Rs. 10. The employee buys the shares at Rs. 10 from Company A on the due date. Would there be tax implication in the hands of the shareholder who renounced the shares and also in the hands of the employee who bought the shares. The fair market value of the shares is assumed to be Rs. 100.
yes, section 50C of the Act will apply, it is advisable to show part of the house transferred as a gift and another part as sales. This is subject to the provisions of the Transfer of Property Act.
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