Tax rules trip up India's fast-track company breakups
India just made it easier for startups and unlisted companies to split up quickly through "fast-track demergers."
But there's a catch: the latest tax bill leaves these quick breakups out of tax-neutral status, which means companies could get hit with hefty taxes—unless they opt for the slower NCLT route to retain tax-neutrality, resulting in delays instead of the smooth ride they hoped for.
What's the problem?
If a company uses the fast-track route, it might have to pay 12.5-20% in capital gains tax, and shareholders could face taxes as high as 36%.
This is making what should be a simple process much more expensive—especially tough for startups and small businesses trying to reorganize fast.
Why are people talking about this?
Industry bodies and business houses are urging the government to fix this in the next Budget so that fast-track demergers don't get bogged down by extra costs.
Without change, these tax hurdles could slow down business reforms and make it harder for young companies to adapt or grow.