ANGELS & DEMONS
AT A TIME when the taxman is slapping 'angel tax' notices on start-ups on premium valuations, the government's repeated assurances promising there will be no coercive action, is comforting. Numbers aren't only how early age investors value startups; they bet on intangibles such as passion, innovation, and goodwill. Explaining their idea of high premium to tax officers is tough, since it is subjective (and based on their own calculations of future growth). Since the onus is on start- ups to justify valuations, and the law allows the taxman discretion in arriving at the FMV, this will only deter innovation and kill early age investment. Initial judgment doesn’t always prove right; and valuations may slide due to unforeseen business circumstances. In that scenario it's draconian to retrospectively tax start-ups on funds invested above the FMV. Let's hope the Tax department withdraws these notices; and doesn't accuse start-ups of tax evasion, all the while claiming it wants to curb money laundering.