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Deep Dive into Section 56(2)(viib) of Income Tax Act, 1961
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Income Tax Departmenttax

Deep Dive into Section 56(2)(viib) of Income Tax Act, 1961

July 4, 2026

This article explores the intricacies of Section 56(2)(viib) of the Income Tax Act, which imposes tax on shares issued above Fair Market Value. Understanding the nuances of Fair Market Value assessment is vital for tax practitioners.

Understanding Section 56(2)(viib) of the Income Tax Act

Section 56(2)(viib) of the Income Tax Act, 1961, popularly referred to as the 'Angel Tax' provision, has undergone several amendments since its introduction in 2012. This section deals with the taxation of shares issued by unlisted Indian companies to residents at a price exceeding their Fair Market Value (FMV). The additional premium received is categorized as 'Income from Other Sources' for the issuing company.

Determining FMV accurately is crucial because it directly impacts whether the premium collected will be liable for tax under this section. Tax professionals must understand the methods for assessing FMV and the implications of fluctuations in market conditions on share pricing.

Given the ongoing discussions and legal disputes surrounding this provision, practitioners should remain vigilant about changes and the latest interpretations in case law. An understanding of Section 56(2)(viib) is essential for advising clients correctly regarding share issues.

Source:Income Tax Department
Practice Areas:tax

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