homestartup NewsNo real effect on fund raising plans of portfolio firms: Info Edge on angel tax changes
No real effect on fund raising plans of portfolio firms: Info Edge on angel tax changes
The phrase ‘angel tax’ is essentially used to describe the tax that must be paid on the funds raised by unlisted companies through the issuance of shares in off-market transactions, if they exceed the fair market value of the company.
Sanjeev Bhikchandani, Founder and Executive VC at Info Edge India on Monday said that there is no real impact of new angel tax provisions on the fund raising plans of portfolio companies. However, he noted that the public markets for new age companies have corrected substantially, and this will have an impact on valuations and the speed of investment.
"We continue to invest. We consider the market correction, especially the US and some follow-on investors might be a little constrained investing in India. They are concerned about that kind of stuff much more than about this currently," he told CNBC-TV18.com.
Bhikchandani further said that quality companies will not face a funding winter, and they will still be able to attract investments. He emphasized the importance of having a strong business model and a clear path to profitability, as these factors will play a significant role in determining a company's ability to secure funding in the current market environment.
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His overall comments suggest that while there may be some challenges in the current market environment, quality companies with strong fundamentals will still be able to raise funds and thrive in the long run.
The whole Angel tax issue has been quite a bother ever since the passage of the Finance Bill and unfortunately for the startup community, the amendments did not take away the sting of the tax hit. Basically, what has happened is that the purview of angel tax has now been increased to cover foreign investors as well, which means that in subsequent rounds of funding, foreign investors, whatever amount they are putting in the company above so-called fair market value, the domestic Indian company, the startup will have to pay tax on that.
The fund received by Indian unlisted companies on the sale of shares will now be taxed under “income from other sources”.
The phrase ‘angel tax’ is essentially used to describe the tax that must be paid on the funds raised by unlisted companies through the issuance of shares in off-market transactions, if they exceed the fair market value of the company.
For more details, watch the accompanying video
(Edited by : Anshul)
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