Business valuation is used to estimate the economic value of business.
Section 56(2)(viib) of Income Tax Act prescribes that where a Private Limited Company receives from a resident person any consideration for the issue of shares that exceeds the FMV of such shares, the same shall be chargeable to Income tax in the hands of the company as ‘income from other sources’.
FMV is to be calculated as per Valuation undertaken by a Merchant Banker or Fellow Chartered Accountant of Institute of Chartered Accountant of India (‘ICAI’) as per the Discounted Free Cash Flow method.
We can help in developing and implementing ESOP structure.
- Advise on alternate structures available for ESOPs;
- Drafting of ESOP Policy and ESOP Agreements;
- Advise on compliances under Companies Act, 2013;
- Drafting and filing of resolutions and forms required under Companies Act, 2013