Rahul Charkha, Partner, Economic Laws Practice (ELP) has been quoted in Business Insider India in their article titled ‘A tax guru explains all that is wrong with Indian government’s latest requirement for startups to disclose creditors’ source of income’.
The Union Budget 2022 makes startups responsible for the source of income of their creditors. This means a startup would have to prove the genuineness and creditworthiness of the said creditor. To this extent, Rahul says, “Tax authorities are well within their right to treat the loans and borrowings as unexplained cash credits if one is unable to prove the source of income. It can then tax the same at 60% (plus surcharge and cess) without providing any benefit of basic exemption limit and slabs and would also attract penal consequences”.
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