ABC Ltd. is a public limited company but shares are not listed in any stock exchange in India as on 31st Dec., 2018. On 1st Jan., 2019, the company issued 10 lakh shares of face value of ₹ 10 per share, the fair market v

Issue of shares at excessive share premium Since, the Shares of ABC Ltd. are not listed in any recognized stock exchange in India, it is a Company in which public are not substantially interested. When such company issues shares at a price in excess of the Fair Market Value, share premium so charged in excess, will be taxable under Section 56 of the Income Tax Act, 1961. Excess premium is (₹ 150 - ₹ 130) ₹ 20 per share. Hence where 10 lakh shares are issued, excess share premium charged is ₹ 200 lakhs. Such liability will arise only when shares are issued to residents . ₹ 200 lakhs will be treated as Income from other sources. Where the shares are issued to non-residents or Venture Capital undertakings , there is no applicability of section 56 of the Income Tax Act, 1961 and hence there will be no tax effect.