We resident Indians have always had a raw deal with the Government.
Until a few years ago, I used to rant against the injustice to resident entrepreneurs (who would be taxed at 22% on capital gains) .vs. NRIs (who'd pay 0% CAPITAL GAINS). This is probably one of the things that prompted me to evaluate the option of being an entrepreneur again ?
Now, I see that I probably have to evaluate the option of being an ANGEL investor.
In India, given that money supply is sooooo scarce for a small startup, my guess is that this is going to be the death knell !. Most investors in Indian startups tend to be either friends / family or resident, Individual investors who have an entrepreneurial streak that they hope is fulfilling from a second-hand effect. In one clean swoop, the Government is planning to take away the complete cover on this form of funding.
India is desperately in need of highly efficient / non-asset-intensive capital. The kind that could have competed against the "real estate" option. Over the last few years, I've been an hopeful advocate of this form or investment : taking personal risks and trying to leverage my experience / contacts etc. In parallel, I have also watched encouraging signs of the market really starting to blossom. The Government, however, seems to be keen on throwing out the baby with the bathwater.
This is a classic case of a RULE being made for EXCEPTION !
Am reminded my conversations with corporate HR during my time in large MNCs / Indian corporates. I'd struggle to convey to the heads of HR & Finance that the "spirit" of any rule should be to encourage compliance and not to cover / plug "holes". Guess it is time for me to take this message to the finmin ?
For those of you wondering what this rant is all about :The new budget proposal is to TAX as INCOME any premium paid (in excess of prescribed FMV - Fair Market Value) towards share purchase of a private company. Who decides this ? The assessment officer !!!.
Let me point out a sore fact - the maximum time of debate between the investor and the entrepreneurs POST the decision to invest is to figure out this VALUE!
Maybe I'm the one who's delusional ? Maybe I should have quit when I saw the government tightening legitimate transfer of funds with 15CA / 15CB - coating it with the words "NEW & LIBERALIZED scheme", although it all but one !.
I guess if I cannot work out options, I'm going to be available in the job market - after all, the government seems intent on furthering a generation of "highly capable coolies" :-(
Until a few years ago, I used to rant against the injustice to resident entrepreneurs (who would be taxed at 22% on capital gains) .vs. NRIs (who'd pay 0% CAPITAL GAINS). This is probably one of the things that prompted me to evaluate the option of being an entrepreneur again ?
Now, I see that I probably have to evaluate the option of being an ANGEL investor.
In India, given that money supply is sooooo scarce for a small startup, my guess is that this is going to be the death knell !. Most investors in Indian startups tend to be either friends / family or resident, Individual investors who have an entrepreneurial streak that they hope is fulfilling from a second-hand effect. In one clean swoop, the Government is planning to take away the complete cover on this form of funding.
India is desperately in need of highly efficient / non-asset-intensive capital. The kind that could have competed against the "real estate" option. Over the last few years, I've been an hopeful advocate of this form or investment : taking personal risks and trying to leverage my experience / contacts etc. In parallel, I have also watched encouraging signs of the market really starting to blossom. The Government, however, seems to be keen on throwing out the baby with the bathwater.
This is a classic case of a RULE being made for EXCEPTION !
Am reminded my conversations with corporate HR during my time in large MNCs / Indian corporates. I'd struggle to convey to the heads of HR & Finance that the "spirit" of any rule should be to encourage compliance and not to cover / plug "holes". Guess it is time for me to take this message to the finmin ?
For those of you wondering what this rant is all about :The new budget proposal is to TAX as INCOME any premium paid (in excess of prescribed FMV - Fair Market Value) towards share purchase of a private company. Who decides this ? The assessment officer !!!.
Let me point out a sore fact - the maximum time of debate between the investor and the entrepreneurs POST the decision to invest is to figure out this VALUE!
Maybe I'm the one who's delusional ? Maybe I should have quit when I saw the government tightening legitimate transfer of funds with 15CA / 15CB - coating it with the words "NEW & LIBERALIZED scheme", although it all but one !.
I guess if I cannot work out options, I'm going to be available in the job market - after all, the government seems intent on furthering a generation of "highly capable coolies" :-(
Wow ! That was quick. Within 20 mins of my posting, I've had 3 calls seeking clarification.
ReplyDeleteYou are welcome to the original memo
indiabudget.nic.in/ub2012-13/mem/mem1.pdf
---------Notes / Clarifications-----------
1. This is a proposal (not a law as yet)
2. This will actually come into force a year from now - but, investments will stop off : Milestones dictate a 8 months lead time in any event
3. This is not valid for "registered" and "foreign" investors