Startup tax exemptions and angel tax — do I need an adviser, or can I do it alone?
Some of it, yes — and we will say so on the call if that is the honest answer. The parts that are worth paying for are the ones where a missed election, a missed deadline or an unverified threshold costs more than the fee: recognition as an eligible startup opens specified exemptions subject to conditions, while valuation rules can treat excess share premium as income of the company.
What if I have already filed and got it wrong?
That is a common starting point. We re-derive the position, identify whether an amendment or a disclosure route is the right vehicle, and tell you which one preserves the relief that is still available. The order matters more than the speed.
How long will it take?
It depends on the documents rather than on us. Once the pack is complete most filings turn around inside a fortnight; anything that needs a certificate from a tax authority runs on that authority's timetable, which we tell you at the start rather than at the end.
What is angel tax and why is our funding round being taxed?
The charge falls on the company, not the investor, and it bites on the part of the subscription price that exceeds the fair value of the shares issued. That is why it feels wrong to founders: the money taxed is capital raised, not profit earned. The rule asks a single question, which is what those shares were worth on the day they were issued, and it answers it from evidence. The round is taxed only to the extent the premium cannot be supported. Whether an exemption removes the charge depends on conditions that must be met and kept, checked for the year of issue.
Do we need a valuation report before we issue shares at a premium?
Before, not after. The rule tests value at the date of issue, so a report prepared once a notice arrives is evidence of your view today rather than of the price then, and it is weighed accordingly. A contemporaneous valuation with its assumptions written down, the board and shareholder records that adopted it, and the business plan the investors actually saw together form a file that answers the question at the moment it is asked. Preparing that file is a small part of the cost of a round. Reconstructing it under assessment is not.
Does startup recognition mean we do not pay tax at all?
No. Recognition opens access to specified exemptions. It does not switch tax off, and the exemptions it opens are conditional. Those conditions are tested against what the company actually does after recognition, not against the application it filed, so a business that changes shape can fall outside a relief it was correctly granted. Recognition also does not by itself resolve the share-premium question, which follows its own rules and its own evidence. We look at the two separately: what recognition gives you for the year, and what the valuation file will support if it is examined.
Our valuation was done after the shares were issued, is that a problem?
It weakens the file rather than destroying it, and how much depends on what else survives from the time. The question is what the shares were worth when they were issued, so anything contemporaneous carries weight: the term sheet, the investor's own diligence, board minutes recording the basis of the price, management accounts, and the plan the investors relied on. We assemble those first and treat the later report as one document among them rather than as the whole answer. Where the record genuinely will not support the premium, it is better to know before filing than during an assessment.
Can the share premium rule apply when the investor is overseas?
The rule asks the same question whoever subscribed: what was the fair value at the date of issue, and what evidence supports it. Whether a particular class of subscriber sits outside the charge depends on the conditions in force for the year of issue, and those conditions have moved more than once, so the position is checked against that year rather than recalled. The practical consequence is identical either way. The valuation file has to exist and has to be dated, so we build it before the round closes and then confirm which treatment applies.
What do we have to keep doing after being recognised as a startup?
Treat the conditions as continuing obligations rather than entry requirements. The reliefs are given subject to conditions, and the company's later activity, ownership and structure are what those conditions are tested against, so a relief can be lost through something done long after it was claimed. In practice that means keeping the records that evidence each condition for every year the relief is claimed, and reviewing a proposed change of ownership or business before it happens rather than reporting it afterwards. A relief withdrawn late costs more than the same relief never claimed.
What is TCS on foreign remittance?
Tax collected at source. When a resident individual remits money abroad under the Liberalised Remittance Scheme — or buys an overseas tour package — the bank or seller collects an amount of tax on top and deposits it against your PAN. It is not a cost and it is not a final tax: it appears in your annual tax statement and is set off against the tax on your return, with the excess refunded. The rates and the purposes they attach to have been amended repeatedly, so we confirm them for the remittance year. See LRS limits and TCS.
What is RNOR status?
Resident but not ordinarily resident — a transitional category in India between non-residence and full residence, reached on the day counts after returning from a period abroad. While it lasts, certain foreign income stays outside the Indian tax base, which makes the timing of a return to India worth planning rather than leaving to chance. It is temporary, and the window is set by the day-count rules. See RNOR status.
