Angel investment at high premium under Income-Tax department scanner

Notices seeking explanation served to start-ups

Indian start-ups that raised capital from domestic investors at an “excessive premium” between Assessment Years 2018-19 and 2020-21 have come under the income-tax (I-T) department scanner.

The tax department has asked a considerable number of start-ups, including those in the financial technology and education space, to justify their shares issued at a premium to domestic investors under angel tax provisions in a recent communiqué, informed two people in the know.

The excess premium received on the sale of shares by an Indian unlisted company to either foreign or domestic investors will be construed as ‘income from other sources’ and liable