Income Tax Regulations on Fair Valuation of Shares and Securities

Given the manner in which Complex Structures are evolving in effecting M&A transactions; and with the emergence of the Start-up Ecosystem which has given birth to hybrid and intricate financial instruments; it has become a pressing need for the Revenue/Income Tax Departments across the globe to upgrade their tax laws/provisions/rules to ensure that a fair and just mechanism is in place so that any gains/income which arise/deemed to have arise in the country, are taxed in the hands of an appropriate assessee (be it the subject company or its investors).

India, in keeping parity with the global approach of taxing income associated with 'Transfer of Shares and Securities' have been upgrading its Income Tax rules pertaining to the same. Needless to mention, the concept of 'Fair Value' and its application is critical for determining the realised/deemed to have realised gains from such transfer of shares and securities.