Executive Pay: The Curious Case of Carlos Ghosn’s Arrest
February 12, 2025
The Harvard Business Review in 1992 took the business world by storm when Kaplan and Norton introduced the idea of balanced scorecard. They argued that even though strategic management was being pursued as an organization wide goal in companies worldwide, in effect they were doing a post-mortem of the business situation at hand. Measurement was […]
Introduction All organizations strive to create value for their customers. This value creates mind space for product and services. Value analysis, therefore, is a scientific method to increase this value. Value is a perception hence every customer will have their own perceptions on how they define value. However, overall at the highest level, value is […]
The list derived from the detailed process map needs to be shortlisted. This can be done in multiple ways. The different tools that are commonly used in six sigma projects to meet the purpose have been written down. They are as follows: Cause Effect Matrix: The cause and effect matrix takes the list of inputs […]
Time and Material Billing Time and material billing refers to the billing process wherein actual number of hours worked and the resources deployed are billed on an as is basis with the margin added to it. In other words, time and material billing refers to the billing that is done as per the actual number […]
The scatter plot can be a useful tool in understanding the type of relationship that exist between the inputs (X’s) and the outputs (Y’s) No Relationship: The scatter plot can give an obvious suggestion if the inputs and outputs on the graph are not related. The points will be scattered throughout the graph with no […]
Obtaining funding for a startup is extremely difficult. It is said that startups receive money only from friends, fools, and family. However, there is another class of investors which provide money to these organizations. They invest in companies which are at very early stages of their product development. They belong to the same ecosystem as venture capitalists do. They have been nicknamed as “angel investors”.
Across the world, angel investors are viewed as being angels. This means they are viewed positively and governments offer various tax breaks to them for investing in early-stage companies. In the United States, the profits made from investing in one early-stage startup can be set off by reinvesting the money in another early stage startup.
However, in India, this is not the case. Here, angel investments are viewed with suspicion! This is the reason why there are no special tax breaks for angel investors. In fact, the tax policy is creating hurdles for such investments. As per the latest tax laws, startups will now have to shell out 30% of the funding that they receive from angel investors as tax. The amount will be added to the head “income from other sources” and be taxed at the maximum rate. Obviously, this hasn’t gone down well with the startup ecosystem. Startups and investors have started an online petition to pressurize the government to abolish this tax. In this article, we will learn more about India’s infamous angel tax.
India has a big “black money” problem. India has a very low rate of tax compliance. This is because a large number of people evade paying income taxes. Only about2% of its population pay any form of income tax.
The tax department is therefore worried that angel investments are nothing but a form of money laundering. They believe that a lot of startup firms have assets which are off the books of the company. Investors are aware of these assets and hence they provide very attractive valuations to these startup companies. Startup companies have defended themselves saying that receiving attractive valuations is not a crime! Startups do not believe that they are generating any black money by evading taxes.
The tax department does not seem to believe this. Hence, they have their specialists who work out the fair value of a startup based on a predetermined formula. If the valuation received exceeds this fair valuation, then it is subject to the highest level of taxation.
The government of India is wary that their policies are damaging the commercial environment in the nation. Hence, they have come up with a policy which certifies innovative startups. If a startup company has this certification, then they are not subject to the draconian angel tax.
There are very stringent parameters to grant this certification. For instance, the turnover of the company must not be more than 25 million rupees, and the age must not be more than five years. Also, the company must be engaged in the production of an innovative product or service. The problem is that some of these parameters are subjective. Also, government officers in India have a reputation for being corrupt. As a result, less than 5% of the startups that apply for this certification are able to receive it.
The entire system has ended up being a mechanism to harass and fleece the owners of startup companies that are trying to make the world a better place and improve India’s economy while attempting to do so.
Your email address will not be published. Required fields are marked *