Startups With Market Down Valuations May For Tax Notice.

Start-ups worried over funding prospects and falling valuations could soon have a bigger problem on their hands. The income tax department is discussing a controversial move to levy tax on those start-ups whose valuations have fallen recently on the grounds that the first premium was more than the firm's fair value. 

Tax officials believe that Section 56 of the Income Tax Act confers on them the power to levy excess consideration, more than the fair value, against issue of shares. "Any consideration received by a company (start up) from a resident, against issue of shares, exceeds the fair market value of such shares, such excess consideration is taxable 

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