The ministry of corporate affairs (MCA) became the latest government department after the income tax to question the premium paid by investors in startups after issuing notices to more than 2,000 startups that have raised money since 2013. The ministry has questioned the valuations at which these startups raised money and is focusing on companies whose valuations have fallen after the first round of fundraising. The notices were issued in the past 45 days with the ministry asking whether these startups have sought exemptions under any government scheme. The ministry’s missive comes two years after the income tax department raised similar questions and demanded that startups pay tax at the rate of 33% if their valuations fell after the first round. The MCA notice is a little different from the one issued by the I-T department in 2016. Income tax officials had only questioned investment by angel investors but the MCA has broadened its enquiry into all forms of investment, including venture capital and private equity transactions.

(Economic Times)