Explained: Why tax is a dilemma for start-up founders in India

After the abolition of the dividend distribution tax, the taxability of salaries and dividends in the hands of a founder of a bootstrapped start-up will be broadly similar, says Ritesh Kumar, IndusLaw

Zerodha Co-founder and CEO Nithin Kamath recently hit the headlines when he highlighted the tax arbitrage that start-up promoters face “between trying to earn by chasing growth and selling a stake in the business over trying to earn profits and taking out dividends”. In a social media post, Kamath went on to explain why most start-up promoters don’t like to take out profits from their venture through salaries, but prefer the share buy-back or share sale route, largely to save on taxes.

Experts explain the dilemma that start-up founders face on the tax front, and how some reform measures could