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Domestic startups come under income tax glare for their recent funding

Economic TimesEconomic Times · 7m
Domestic startups come under income tax glare for their recent funding

Several new economy ventures in the fintech sector have received income tax notices under Section 68 of the Income Tax Act. These notices have combined the investments received by startups with their income, leading to tax and penalty levies. In one case, a startup has been asked to pay Rs 37 crore in tax and penalty on funding of Rs 40 crore. Startups registered with the Department for Promotion of Industry and Internal Trade (DPIIT) typically do not face such scrutiny. Venture funds and AIFs have also received tax notices, causing concerns about the impact on working capital. The government had amended Section 68 of the IT Act in 2022 to seek information about the sources of venture fund infusion.

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