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1.You need to show total holdings.
2.It will go into sales proceeds column.
3.It should be mention in A5 a(i)
4.When an owner of Unquoted share ("Shares") in a Company transfers the shares to any person, he is required to pay Capital Gain tax on the difference between the sale consideration received by him and the cost of acquisition of such shares (or the inflation indexed cost, wherever applicable).
It is important to check if the "Sale consideration" that he receives from the buyer is at least equal to or more than the "Fair Market Value" ("FMV") as defined under Rule 11UA of The Income Tax Rules, of the shares sought to be transferred.
As defined under Rule 11UA, the fair market value of unquoted equity shares shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner under (a) or (b), at the option of the assessee, namely; -
The fair market value of unquoted equity shares shall be calculated simply by ascertaining "Book value of Assets (Less) Book value of Liabilities."
- For ascertaining the book value of assets, following amounts shall be excluded:
- Advance Tax, Tax deduction or collection at source or any amount of tax paid as reduced by refund claimed under the Income Tax Act.
- any unamortized amount of deferred expenditure which does not represent the value of any asset.
- For ascertaining the book value of liabilities, following amounts shall be excluded:
- the paid-up capital in respect of equity shares;
- the amount set apart for payment of dividends on preference or equity shares
- reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;
- any amount representing provision for taxation, other than amount of tax paid as reduced by the amount of tax claimed as refund
- any amount representing provisions made for meeting liabilities, other than ascertained liabilities;
- any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference share.
The fair market value of the unquoted equity shares as determined by a Merchant B anker as per Discounted Free Cash Flow Method. Earlier, a Chartered Accountant was also permitted to determine the FMV of such equity shares. However, with effect from 24th May 2018, this right of Chartered Accountant is taken away and therefore only Merchant Banker is authorised to determine the FMV of such equity shares.
If the transaction of transfer of shares takes place at a price which is less than the FMV, there is a tax impact both on buyer of the shares as well as the seller. The legislation has made an attempt to In order to ensure the full consideration is not understated in case of transfer of unlisted shares, section 50CA
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