Recently many startups, especially those in the fintech industry, have received income tax notices. On these, industry officials and investors said that they are creating concern in company circles. He said such actions are regressive and pose serious challenges to startup operations and investor confidence.
These notices were issued under Section 68 of the Income Tax Act. According to sources, to calculate the tax, they have added the investment made in the startup along with the revenue. According to fintech industry officials, the companies to which notices have been sent are being asked about the credentials of the investors who have invested money.
Another point of concern is the valuation of many of these startups, for which special premiums have been calculated, said a source familiar with the development. The source said that these income tax notices were given just a few weeks before the end of the financial year (FY24). These notices were related to FY 22 and FY 23.
Companies were asked to give details about investors on three or four days’ notice. The source said, ‘People also felt that since the Income Tax Department had the PAN details of these investors, why did it not seek information from them directly?’ Meanwhile, people in the know said institutional investors and those investing in the banking, financial services and insurance (BFSI) sector have also been affected by the move.
“Investors are reluctant to share information because they are not obliged to share details,” the source said. For this reason, it is possible that these companies may not have immediate access to some of the requested information. A fintech industry participant said companies need to find out the root cause of the authorities’ actions.
First Published – April 4, 2024 | 11:32 PM IST
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