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Or [Book a CONSULTATION](https://calendly.com/consulttreelife) Δ #### Stay updated with our Newsletter Δ AI Summary - The CBDT notified amendments to Rule 11UA of the Income-tax Rules, 1962 on 25/09/2023, revising the valuation framework for angel tax purposes. - The amendments follow a timeline that began on 19/05/2023 when the CBDT proposed changes and notified a list of excluded non-resident entities, followed by the Central Government notifying exempt entities on 24/05/2023. - The CBDT introduced specific valuation rules for Compulsorily Convertible Preference Shares (CCPS) in addition to the changes for equity shares. - A new valuation method allows companies to use the price offered to a Venture Capital fund, VC company, or specified Category I or II AIF as the fair market value benchmark for unquoted equity shares. - Under the VC-based valuation method, consideration from other investors must be received within 90 days before or after the date of issue of the shares being valued. - Non-resident investors have an additional option to determine fair market value through a merchant banker using one of five international pricing methods: Comparable Company Multiple, Probability Weighted Expected Return, Option Pricing, Milestone Analysis, or Replacement Cost Method. - A safe harbour allowing a 10 percent upside variation is available for valuations done under the Net Asset Value and Discounted Cash Flow methods. - A merchant banker's valuation report must not be older than 90 days from the date of issue of shares to be considered valid for the valuation date. - Valuation for investment received from notified entities is also permitted for both equity shares and CCPS, subject to the same 90-day consideration window. Content Overview [ Contact us ](#contact-us-sidebar) #### Content Overview #### We take care of your Legal, Finance & Compliance needs! [Let's Talk](https://calendly.com/consulttreelife) #### Get in touch with us Your information is confidential and secure Please leave this field empty. Or [Book a CONSULTATION](https://calendly.com/consulttreelife) Δ Blog Content Overview - [1 Timeline](#Timeline) - [2 New Valuation methods](#New_Valuation_methods) - [3 Applicability of valuation methods](#Applicability_of_valuation_methods) The Central Board of Direct Taxes (CBDT) notified amendments to Rule 11UA of the Income-tax Rules, 1962 applicable for computing angel tax on September 25, 2023 pursuant to the draft rules introduced earlier and feedback received from stakeholders and general public. In addition to the proposed changes, the CBDT has introduced rules for valuation for Compulsorily Convertible Preference Shares (CCPS). ## Timeline - May 19, 2023 – CBDT [proposes](https://incometaxindia.gov.in/Lists/Press%20Releases/Attachments/1138/Press-Release-Changes-Proposed-To-RULE-11UA-And-Consequent-notifications.pdf) changes to Angel tax rules and notify list of excluded non-resident entities - May 24, 2023 – The Central Government [notifies](https://incometaxindia.gov.in/communications/notification/notification-29-2023.pdf) entities to whom Angel tax provisions will not apply - September 25, 2023 – The CBDT [notifies](https://incometaxindia.gov.in/communications/notification/notification-81-2023.pdf) amendments to Rule 11UA ## **New Valuation methods** In addition to the existing valuation methods \[i.e., Book / Net Asset Value (NAV) and Discounted Cash Flow (DCF)\] the CBDT has introduced the below options: •**Price offered to Venture Capital (VC):** A VC undertaking can consider the investment valuation received for the issuance of unquoted equity shares from either a VC fund, a VC company, or a specified fund (Cat I / II AIF) as a valuation benchmark for determining FMV of equity shares issued as long as it does not exceed the aggregate investment so received. Consideration from other investor should be received within a period of 90 days before or after the date of issue of shares which are the subject matter of valuation •**Price offered to notified entities:** The valuation of investment received by a company from notified entities can also be considered subject to conditions mentioned above •**International pricing methods**: For investment by non-residents, they have an additional option to determine FMV by a Merchant Banker as per any of the below 5 methods: (i) Comparable Company Multiple Method (ii) Probability Weighted Expected Return Method (iii) Option Pricing Method (iv) Milestone Analysis Method (v) Replacement Cost Method ## **Applicability of valuation methods** **Method****Report issued by****Investment received from Resident****Investment received from Non-resident**Equity sharesCCPSNAV²Not specifiedYesYesDCF²Merchant Banker³YesYesPrice offered to venture capital–YesYesInternational pricing methods²Merchant Banker³––Price offered to notified entities–YesYes1 CCPS can also be valued as per valuation of equity shares determined in line with the above methods as applicable 2 Safe Harbour available i.e. 10% upside variation is allowed 3 Date of merchant banker report not older than 90 days from date of issue of shares can be considered as valuation date Do reach out to us at if you need further help in understanding this or obtaining valuation reports ### Related posts: 1. [What Is An Income Statement?](https://treelife.in/finance/what-is-an-income-statement/ "What Is An Income Statement?") 2. [Fundamentals of Corporate Finance](https://treelife.in/finance/fundamentals-of-corporate-finance/ "Fundamentals of Corporate Finance") 3. [Understanding EBITDA – Definition, Formula & Calculation](https://treelife.in/finance/understanding-ebitda-definition-formula-calculation/ "Understanding EBITDA – Definition, Formula & Calculation") 4. 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