Income Tax Crackdown: I-T Dept Issues Show-Cause Notices To Startups Over Foreign Investments Routed Through Singapore

The income-tax (I-T) department has issued showcause notices to several startups over funds routed through Singapore seeking explanations for investments received over the past five years. The taxmen is probing the source, identity and creditworthiness of overseas investors in the funding of Indian startups.

“Notices have been sent to several start ups to justify their foreign fundings in last 5 years,” confirmed a senior adding the tax department is reviewing the unexplained credits in tax payers books.

The tax department has issued formal show-cause notices asking for the source, identity and the creditworthiness of the foreign investors especially the non-resident Indians are under the scanner of tax officials for holding bank accounts in Singapore.

India has received financial data from Singapore under bilateral tax treaties and Automatic Exchange of Information Framework leading to the scrutiny of investments in several startups based in Bangalore, Mumbai, Pune, Hyderabad and NCR.

The IT department has also launched a review of tax benefits claimed by Mauritius-based foreign portfolio investors (FPI) under India- Mauritius treaty and issued notices to few Mauritius-based FPIs for their tax residency certificates.

The IT notices has led to panic in the growing startup ecosystem fearing tax terrorism in the guise of checking foreign fundings and investments from HNI.