Startups face I-T heat over funding via S'pore

The income-tax (I-T) department has issued showcause notices under Section 68 of the Income-Tax Act to several startups over funds routed through Singapore, seeking explanations for investments received over the past five years, people familiar with the development said.

- MONIKA YADAV

The department is questioning the source, identity, and creditworthiness of overseas investors in these transactions, they said.

In addition, the notices are also being served on Non-Resident Indians (NRIs) holding bank accounts in Singapore.

"These are not routine inquiries, but formal show-cause notices. Companies are being asked to justify the inflow of capital, even from the past years, by furnishing detailed investor documentation," a person familiar with the matter said.

Section 68 of the Income-Tax Act, 1961, allows the department to question unexplained credits in a taxpayer's books. The notices require companies to establish the identity of the foreign investor, their creditworthiness and the genuineness of the transaction.

"If the response satisfies the department, the case is closed. But several startups are struggling to gather such granular data, especially for legacy transactions," said a source.