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Indian Government To Tax Angel Funding

Posted by samzenpus on from the nothing-is-free dept.

kousik writes "The Indian Government proposes to tax Angel Investment as income and is asking start-ups to pay a 30% tax on the funding. From the article: 'Ravi Kiran, co-founder of middle-India advisory Friends of Ambition (FoA) and member of Indian Angel Network told Firstpost: “There seems to certainly have been an error in understanding on the part of the Budget makers. If this is pushed through, it will spell serious trouble for the angel investor and entrepreneurship space. I feel this is an error and should be corrected quickly before it leads to confusion.”'"

4 of 157 comments (clear)

  1. Selling shares is debt, not income by EmagGeek · · Score: 5, Insightful

    It's clear the legislators have zero clue what investment means.

    When a company receives startup funding, it is in exchange for ownership shares. That makes it borrowing, not income. Shareholder Equity offsets that funding on the balance sheet.

    1. Re:Selling shares is debt, not income by whoever57 · · Score: 5, Interesting

      It's clear the legislators have zero clue what investment means.

      True enough.

      When a company receives startup funding, it is in exchange for ownership shares. That makes it borrowing, not income. Shareholder Equity offsets that funding on the balance sheet.

      Now you are showing your ignorance. It's not a loan. It's not borrowing.

      But the summary doesn't tell the whole story (I know, what a shock!):

      There is a Budget proposal to tax at 30 percent any investment received by closely held companies where the aggregate investment exceeds the fair market value of shares.

      Most likely, this is aimed at money laundering. The uncertainty caused by this and the possible corruption amonst those who enforce this are likely to stifle angel investment.

      --
      The real "Libtards" are the Libertarians!
  2. Re:Wow by Anonymous Coward · · Score: 5, Insightful

    Don't be live the summary. The Indians are worried about tax dodges exploiting a loophole by pretending it is investment when it is just hiding cash in a shell organization.

  3. Re:Equity by alexander_686 · · Score: 5, Informative

    Equity = Assets - Liabilities

    The investors trades cash for shares with the company - So your right there. On the other hand, for the company the new cash, an asset, is coming into the company, This will increase both the asset account and the equity account.

    The accounting transactions would be
          Credit the cash account in Assets
          Debit the Paid In Capital account in Equity.

    If the company was issuing new debt - and thus no new equity, the accounting transactions would be:
              Credit the cash account in Assets
                Debit the Long Term Debt Account in Liabilities.