Tax department notifies 'Angel Tax' rules for valuing investments in startups

New Delhi, Sep 26 (PTI) The income tax department has notified rules for valuation of investments by resident and non-resident investors in startups, thus paving way for implementation of the changes brought in 2023-24 Budget.

As per the changes in Rule 11UA of I-T rules, the Central Board of Direct Taxes (CBDT) provides that the valuation of compulsorily convertible preference shares (CCPS) and equity shares issued by unlisted startups can be based on the fair market value.

The amended rules also retain the five new valuation methods proposed in the draft rules for consideration received from the non-residents viz., (i) Comparable Company Multiple Method, (ii) Probability Weighted Expected Return Method, (iii) Option Pricing Method, (iv) Milestone Analysis Method, and (v) Replacement Cost Method.