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Imagine you’re starting up. You have a great idea in place, the initial funds, and then it happens: you raise money.
You start working towards making profits, or at least, trying to make profits. You’re in touch with investors to raise another round of money. And suddenly, you’re slapped with a notice from the Income Tax office.
Startups are being questioned on the rationale of ‘loss-making businesses’ being valued at a premium to their net worth. As it is with nascent startups, they have a lot of losses on their books, which means that their net-worth i.e. assets minus liabilities is almost always negative.
Is it fair? Not really.
Most startups that have received notices from the income tax office were confused when the valuation of their business was rejected. The government’s intention is to promote startups, they said; but the income tax notices shook that faith in many entrepreneurs. Where do things go from here? Read to know.
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