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

    Nidhi Khurana
    September26/ 2023
    Last Updated:

    New Delhi: Rules for the valuation of investments made by resident and non-resident investors in startups have been announced by the income tax department, clearing the way for the implementation of the adjustments made in the 2023-24 Budget.

    The Central Board of Direct Taxes (CBDT) has amended Rule 11UA of the I-T rules to permit the use of fair market value in determining the value of compulsorily convertible preference shares (CCPS) and equity shares issued by unlisted businesses.

    The five new valuation methods for consideration received from non-residents that were proposed in the draught rules are still in effect under the amended rules: (i) the Comparable Company Multiple Method, (ii) the Probability Weighted Expected Return Method, (iii) the Option Pricing Method, (iv) the Milestone Analysis Method, and (v) the Replacement Cost Method.—Inputs from Agencies