09 September 2013
The premium provisions will always apply after the incorporation of the company. The premium is derived on the basis of valuation under different method. And at the time of incorporation it is not possible.
As per Section 56(2)(viib) of the Income-tax Act, 1961; any company issuing shares to a resident at price higher than the fair value (as computed in accordance with Rule 11U and 11UA of the Income-tax Rules 1962) would be subject to tax in India on the amount of premium received in excess of the fair value of such shares. For example -
Face Value of Shares - 10 Fair Value of Shares - 15 Issue Price of Shares - 20
Considering the provisions in above example Rs.5 will be subject to tax under Section 56(2)(viib).