(LiveMint)
The government assured that genuine investments in start-ups will not be taxed for exceeding fair market valuation. The assurance comes after news reports said some start-ups have received notices from the income tax (I-T) department seeking details of their share transactions. The Income Tax Act treats share premium received from the sale of unlisted shares in excess of their fair value taxable as income from other sources. The move to seek clarifications on share premiums under section 56 of the Income Tax Act has been on for a few years.
The idea is to check instances like politicians accepting bribes in the guise of premium for shares in unlisted companies held by them. The government, however, has exempt start-ups registered under the commerce ministry from the purview of this provision. The department of industrial policy and promotion (DIPP) said that it has taken notice of news reports. It said that there is a mechanism in place since April 2018 to grant exemption from the provisions of section 56(2) (vii b) of the Income Tax Act to genuine investors in recognised start-ups.
