I-T dept to notify investor for taxing foreign investments in unlisted firm

The Income Tax Department will soon notify rules specifying the class of investors and norm of valuation for implementation of the Budget provision of taxing foreign investment in unlisted companies.

The modified valuation rules would provide for ascertaining the fair market value (FMV) of shares of unlisted companies to levy tax on non-resident investments, an official said.

The Finance Act, 2023, has amended Section 56 (2)(viib) of the I-T Act, thereby bringing overseas investment in unlisted closely held companies, except DPIIT-recognised startups, under the tax net.

The amendments are needed as I-T Act and FEMA provide different methodologies for calculating the FMV of shares of unlisted companies.

"Rule 11UA of I-T Rules will be re-prescribed taking into account the concerns expressed by stakeholders to harmonise it with the FEMA regulations," another official said.

Rule 11UA deals with the determination of FMV of assets, other than immovable property.

Under the existing nor