Section 50CA of the Income Tax Act, 1961

Introduction

Section 50CA of the Income Tax Act, 1961 is a provision introduced in the Finance Act, 2017. The main aim: to curb the practice of undervaluing shares in certain transactions. This section provides for the determination of the fair market value for the transfer of shares. The aim of this provision is to ensure that the transfer of shares is done at an arm’s length price. It also aims to prevent the erosion of the tax base due to undervaluation.

In this article, we will discuss the implications of Section 50CA and the determination of fair market value. We will also look at the issues of double taxation that arise due to this provision.

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