The summary is completely misleading. The proposed amendment specifically provides an exemption for VC funded companies. From the proposed Finance Bill -
"(viib) where a company, not being a company in which the public are substantially interested,
receives, in any previous year, from any person being a resident, any consideration for issue of
shares that exceeds the face value of such shares, the aggregate consideration received for
such shares as exceeds the fair market value of the shares:
Provided that this clause shall not apply where the consideration for issue of shares is received
by a venture capital undertaking from a venture capital company or a venture capital fund"
Now, there may be situations where a start-up is unable to use this exemption [say, where the investor is not registered as a VC fund in India]. There are trivial work-arounds for such cases, which any decent tax advisor can come up with. [Eg: Issue shares at face value, but with lower voting / dividend rights etc].
Long story short, I don't expect things to change in any meaningful manner on the ground.
PS: Last year, the tax department identified several cases where kickbacks from govt projects were disguised as share investments at very high premiums. The tax department seems to have brought in a (half-baked) proposal to stem such money laundering.
PPS: IAACA, sadly
