The Central Board of Direct Taxes (CBDT) recently issued Notification No. 30/2023-Income Tax under the Income Tax Act. The notification provides an exemption to certain provisions of section 56(2) (viib) of the Income-tax Act, 1961, pertaining to consideration received by a company for the issuance of shares that exceeds the face value of such shares. This exemption applies under specific conditions and requires the company to file the necessary declaration. Let’s delve into the details of this important notification.
Key Details of CBDT Notification No. 30/2023-Income Tax:
- Applicability: The notification is applicable under clause (ii) of the first proviso to clause (viib) of sub-section (2) of section 56 of the Income-tax Act. It supersedes a previous notification and is effective from April 1, 2023.
- Exemption for Consideration Received: According to the notification, the provisions of section 56(2) (viib) shall not apply to consideration received by a company for the issuance of shares that exceeds the face value of such shares. However, this exemption is applicable only if the consideration is received from a person and the company fulfills the conditions specified in the notification issued by the Ministry of Commerce and Industry in the Department for Promotion of Industry and Internal Trade (DPIIT). Additionally, the company must file the declaration mentioned in the DPIIT notification.
- Deemed Date of Implementation: The notification is deemed to have come into force from April 1, 2023.
- Explanatory Memorandum: The notification includes an explanatory memorandum that certifies that no person is adversely affected by giving retrospective effect to this notification. This ensures that the changes made do not negatively impact any individual or entity.
CBDT Notification No. 30/2023-Income Tax introduces an important exemption for consideration received by a company on the issuance of shares that exceed the face value of such shares. The notification provides relief from certain provisions of section 56(2) (viib) of the Income-tax Act, subject to fulfilling specific conditions and filing the required declaration. Businesses should carefully review the notification and ensure compliance with the stated conditions to avail the exemption. It is advisable to consult tax professionals or experts to understand the implications of this notification and to fulfill all necessary obligations under the Income-tax Act.