Start-ups, some NBFCs demand exemption from thin capital provisions

Experts say start-ups have low Ebitda initially and debt is raw material for NBFCs' biz requirements

As the Finance Bill came up for debate in the Lok Sabha on Tuesday, start-ups and some non-banking financial companies (NBFCs) demanded an exemption from a provision of the draft legislation. According to the provision, income tax deduction is denied to those companies whose interest payment on overseas debt to associated enterprises exceeded 30% of their earnings before interest, taxes, depreciation and amortisation (Ebitda).

Banks and insurance companies have already been exempted from the Budget proposal, technically called a provision on thin capital incorporated in the Bill following an action plan by the Organisation for Economic Co-operation and Development (OECD) on