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Angel Tax

 While valuation professionals like merchant bankers and CAs might employ established methods to estimate a start-up's fair market value, they might not be able to predict the future with certainty

The Central Board of Direct Taxes (CBDT) on May 26 issued draft rules providing more flexibility for valuation of equity investments made in unlisted start-ups

Questions arise why countries like Singapore, Mauritius and the United Arab Emirates, which account for a majority of inbound foreign direct investment, are missing from CBDT’s notification

The list, however, excludes investment from countries like Singapore, Netherlands and Mauritius

The inclusion of five new valuation methods will give stakeholders much-needed flexibility during the funding process

The proposed changes in angel tax policies could result in global investors pressuring start-up founders to move their company headquarters overseas, which is unlikely to benefit any stakeholder in the contemporary ecosystem