Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Shares

Question:
What is the maximum limit of premium on which shares can be issued by the company?
Options:
5%
10%
50%
No limit
Correct Answer:
No limit
Explanation:
There is no maximum limit of Security Premium under the Companies Act, however as per Income tax if a company issue share at a premium that is not the prevailing market rate or excess premium over market rate then excess premium is chargeable to income tax as per section 56.