Delhi, India: An official stated that the income tax department is likely to issue modified valuation rules in accordance with the I-T Act for determining the fair market value (FMV) of shares of unlisted companies in order to levy tax on investments made by non-residents. With the exception of DPIIT-recognized startups, the Finance Bill of 2023 proposes amending a section of the Income Tax Act to include overseas investment in unlisted closely held companies within the tax net.
The official said that changes are needed because the I-T Act and FEMA have different ways of figuring out the FMV.
Currently, only investments in closely held companies made by residents or domestic investors are subject to taxation above the fair market value. The term "angel tax" was used to describe this.