Angel Tax on Foreign Investments valuation rules to be reviewed
The Indian government is now reviewing the assessment guidelines for this charge on foreign investments in startups in the wake of the proposal to change the angel tax regulations. Only Indian citizens and funds that are not registered as alternative investment funds were subject to the so-called angel tax up to this point (AIFs).
Challenge for startups: The most recent action was taken in response to concerns that including international investors under the angel tax rules could discourage expansion funding. Since startups are now experiencing a fundraising winter, it is anticipated that the planned adjustments may make life challenging for them.
The government is looking into the value standards set out by two different legislation, according to a government official. “This would be examined. It could be clarified through rules as well,” the official said.
Budget proposals: The administration intends to change Section 56(2)(viib) of the Income-Tax Act, which deals with the angel tax provision. According to experts, valuation issues will arise as various procedures are outlined in various legislation.
Unquote, quote According to Vikas Vasal, national managing partner, tax, Grant Thornton Bharat, “the moot issue is that valuation of any corporation is an estimate based on several futuristic presumptions, which may or may not materialise.”
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