‘Beauty is in the eye of the beholder’ goes a famous quote! While everyone acknowledges it, the 2023 budget seems to propose something different.
Investments by non-resident investors (barring a few exceptions including in case of investment by venture capital funds) are now proposed to be taxed under section 56 of the Income Tax Act for investing at a premium over the fair value while making investments. Even start-ups who exceed the specified threshold of INR 25 crores of paid up capital and premium may not be exempted. While investments can be made at fair market value, if the premium is higher, the investee company will be taxed for the same. It is a unique instance of a capital investment being considered income and being subject to taxes, and has puzzled one and all.
Please click here to read the full article by Raj Ramachandran, published in The Times of India.
Raj specializes in Corporate Commercial, Banking & Finance and Cross Border Investments & Acquisitions.