Acquisition of Shares – A perspective on tax considerations while determining fair market value TAXABLE INCOME ON THE ACQUISITION OF SHARES: DEPENDENT ON FAIR MARKET VALUE Under the provisions of the Income-tax Act, 1961,the sale of shares of an unlisted Indian company above the fair market value of the shares can result in “income” in the hands of the seller and consequently result in income-tax liability.Similarly, if the purchaser of shares of an unlisted Indian company pays a price lower than the fair market value of the shares purchased, the purchaser may become liable to pay income tax. Recently, several unlisted Indian companies that have received investments and investors in such companies have received notices from the Income-tax department questioning the valuation at which deals have been concluded. The Income-tax department has claimed that analogous to a share sale transaction, subscription to shares of an Indian company will render the premium paid ab...