In September 2017, Nikunj Bubna was in the midst of raising another round of funds for the customer engagement and acquisition platform company he founded—Whats Extra India Private Limited. He had raised Rs 1.50 crore ($215,070) from angel investors nearly three years ago and signed up over 100 brands on his platform. His platform was one, where, while a customer made a payment, suggestions would pop up for items to be added to the purchase. Business was good. But there was trouble brewing. Except, Bubna didn’t know it yet.

In November-December 2016, he received a notice from the income tax office. So he sent his chartered accountant (CA) to the income tax officer. The tax officer wasn’t convinced though about the valuation of his company in the seed and angel rounds. Bubna tried explaining why his investors were ready to pay a premium on the face value of the shares of his company that continued to make losses. He explained that it takes time. After all, he was creating a platform that will make money once there are enough people on board. That’s how startups work, he told this reporter over the phone. The losses are front-ended so that the company makes profits later.

“We had devised a system where we had 103 brands signed up,” he says. “We were operating in over 450 stores in Bombay.”

Bubna was in the midst of building an upgrade of the product and he needed more money to expand in September 2017. But all that came to nothing. By January 2018, he ran out of money and shut his business down. His investors didn’t fund the next round. He couldn’t file an appeal against the tax demand, a number we’ve calculated at Rs 50 lakh ($71,906) including interest for ease of explanation in the story. (Bubna requested that the actual figure not be shared.) To appeal he would have had to pay 20% of the amount of the demand. He couldn’t run his business and fight the case.

Essentially, the taxman wondered how a loss-making company would be a viable investment opportunity for investors. Why would a company that is not making money command a premium when investors buy more shares in it?

Using a legal provision meant to catch illicit money laundered by inflating share prices of companies when they are sold, income tax officers across India have been issuing notices to thousands of entrepreneurs over the past year. All of them had to answer one question: why is someone funding your losses? Why are your investors buying your equity shares at a premium when the business isn’t doing well?

Many entrepreneurs, over the last 3-4 months, have taken to social media to voice their anguish. There has been panic that the government—which had, in April 2018, promised not to take coercive action and impose the dreaded ‘angel tax’ on startups—is out to get them.


Vivek Ananth

After dabbling with an auditing job and then at a software product company, Vivek Ananth has decided to take the plunge into journalism. In his last assignment, Vivek was at Cogencis, a financial newswire. A Chartered Accountant, Vivek completed his post-graduate diploma in journalism from IIJNM Bengaluru in 2016. At The Ken, Vivek will write on the intersection of technology and business.

View Full Profile

Available exclusively to subscribers of The Ken India

This story is a part of The Ken India edition. Subscribe. Questions?


Annual Subscription

12-month access to 200+ stories, archive of 800+ stories from our India edition. Plus our premium newsletters, Beyond The First Order and The Nutgraf worth Rs. 99/month or $2/month each for free.

Rs. 2,750


Quarterly Subscription

3-month access to 60+ new stories with 3-months worth of archives from our India edition. Plus our premium newsletters, Beyond The First Order and The Nutgraf worth Rs. 99/month or $2/month each for free.

Rs. 1,750


Single Story

Instant access to this story for a year along with comment privileges.

Rs. 500


Annual Subscription

12-month access to 150+ stories from Southeast Asia.

$ 120


Quarterly Subscription

3-month access to 35+ stories from Southeast Asia.

$ 50


Single Story

Instant access to this story for a year along with comment privileges.

$ 20



What is The Ken?

The Ken is a subscription-only business journalism website and app that provides coverage across two editions - India and Southeast Asia.

What kind of stories do you write?

We publish sharp, original and reported stories on technology, business and healthcare. Our stories are forward-looking, analytical and directional — supported by data, visualisations and infographics.

We use language and narrative that is accessible to even lay readers. And we optimise for quality over quantity, every single time.

What do I get if I subscribe?

For subscribers of the India edition, we publish a new story every weekday, a premium daily newsletter, Beyond The First Order and a weekly newsletter - The Nutgraf.

For subscribers of the Southeast Asia edition, we publish a new story three days a week and a weekly newsletter, Strait Up.

The annual subscription will get you complete, exclusive access to our archive of previously published stories for your edition, along with access to our subscriber-only mobile apps, our premium comment sections, our newsletter archives and several other gifts and benefits.

Do I need to pay separately for your premium newsletters?

Nope. Paid, premium subscribers of The Ken get our newsletters delivered for free.

Does a subscription to the India edition grant me access to Southeast Asia stories? Or vice-versa?

Afraid not. Each edition is separate with its own subscription plan. The India edition publishes stories focused on India. The Southeast Asia edition is focused on Southeast Asia. We may occasionally cross-publish stories from one edition to the other.

Do you offer an all-access joint subscription for both editions?

Not yet. If you’d like to access both editions, you’ll have to purchase two subscriptions separately - one for India and the other for Southeast Asia.

Do you offer any discounts?

No. We have a zero discounts policy.

Is there a free trial I can opt for?

We don’t offer any trials, but you can sign up for a free account which will give you access to the weekly free story, our archive of free stories and summaries of the paid stories. You can stay on the free account as long as you’d like.

Do you offer refunds?

We allow you to sample our journalism for free before signing up, and after you do, we stand by its quality. But we do not offer refunds.

I am facing some trouble purchasing a subscription. What can I do?

Please write to us at [email protected] detailing the error or queries.