Until now, these provisions were applicable only to local resident investors but now the ambit has been widened to check tax avoidance. The provisions will apply to all individual foreign resident investors, market experts told ET, adding that there is a need for further clarity on whether it will also apply to foreign investors structured as funds and institutional investors.
According to the proposal, the excess premium received on sale of shares by an Indian unlisted company to a foreign investor will be construed as “income from other sources” and subject to tax. The government has proposed to extend the so-called ‘angel tax’ provisions to transactions involving foreign investors. Privately held companies such as startups selling shares at a premium to foreign investors may require paying additional tax, which could affect fundraising for unlisted domestic companies.
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