The Interim Budget for this year was a Vote on Account Budget considering that General Elections are scheduled this year. During the Budget speech, the Hon’ble Finance Minister summarised the initi...
The investor community, particularly those in the venture capital and private equity
space, are in a bit of disbelief on account of the recent budget announcement that
proposes to amend Section 56(2)(viib) of the Income-tax Act, 1961 (“the Act”).
Hitherto applicable to resident investment in ‘closely-held’ companies (typically
private limited companies), any share premium over and above fair market value
(FMV) of shares issued is taxable in the hands of the Indian company, issuing the
shares. Certain exceptions have been carved out in the legislation, such as investment
by registered venture capital funds, category I or II Alternative Investment Funds, and
investment received by registered start-ups, venture capital undertakings etc.
