Transfer of shares of unlisted stressed companies at a price below its fair market value might soon be exempt from the tax net, according to the government’s plans. The move, if implemented, would bring down the cost of investment and benefit buyers. Fair market value is the company’s adjusted book value. The government is also deliberating on allowing carry forward of losses if over 51 per cent shares of a stressed company change hands. The tax on transfer of shares in unlisted companies was becoming an issue in insolvency cases. Under Section 56 of the Income-Tax (I-T) Act, a transfer of shares in an unlisted company at a price below the fair market value is considered income in the hands of the transferee, and is subject to tax under the head ‘other income’.

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