Tag income tax

Foreign Currency Exposure:

The Foreign Currency Exposure is a risk associated with the businesses and investors engaged in the activities (trade and investments) of dealing in foreign currency transactions. The entities involved in the activities of transactions in different foreign currency denominations and does not take steps to protect themselves from currency fluctuations.

This exposure arises when a company or individual holds assets, liabilities, or cash flows in a foreign currency without implementing any hedging mechanisms to mitigate potential adverse currency fluctuation.

Entities needs to hedge ourselves from foreign currency exposure in the market to avoid any risk of volatility in the exchange rates and Derivative hedging is the one of the best ways to hedge.

Unhedged foreign currency exposure (UFCE):

The RBI issues guidelines for banks to manage their foreign currency exposure either fund base or non-fund base, in an attempt to reduce the risk of unhedged exposure on the banking system during extreme volatility in forex markets.

Banks would be required to assess the unhedged foreign currency exposures of all entities to whom they have an exposure in any currency.

Accordingly, the banks were given advisory through the issuance of various directions, guidelines and circulars to develop a framework for regular monitoring of entities that do not have a hedge. Henceforth, the present directions dated 11th October 2022

Applicability of the Directions:

The provision pertaining to the current directions shall apply to all commercial Banks excluding Payments Bank and Regional Rural Banks along with the Overseas Branches and Subsidiaries of Banks incorporated in India.

These Directions shall come into effect from January 1, 2023.

Computation of UFCE:

Banks shall ascertain the Foreign Currency Exposure (FCE) of all entities at least on an annual basis. Banks shall compute the FCE following the relevant accounting standard applicable for the entity. For ascertaining the Foreign Currency Exposer, the banks shall also include all the sources of an entity’s exposure, including Foreign Currency Borrowings & External Commercial Borrowings.

UFCE shall be obtained from entities on a quarterly basis based on statutory audit, internal audit or self-declaration by the concerned entity. Moreover UFCE information shall be audited and certified by the statutory auditors of the entity, at least on an annual basis.

Provisioning and Capital Requirements:

The bank is required to calculate the total potential loss to the entity from Unhedged Foreign Currency Exposure. It shall be determined by using the data published by FEDAI on the annual volatility rate in the USD-INR exchange rate for the last 10 years and multiplying it with the UFCE of an entity.

The bank is required to ascertain the susceptibility of an entity towards adverse exchange rate movements. It shall be determined by computing the ratio of potential loss to the entity from UFCE and the entity EBID (Earnings before interest and depreciation).

In case if the bank is unable to gather information on UFCE and EBID of an entity due to restrictions on disclosure of information, then, in that case, the bank can compute the susceptibility ratio by using data that is immediately preceding the last four quarters.

In case of Unlisted Company if the information on EBID and UFCE is not available due to the non-availability of the last audited results of the last quarter, then, in that case, the bank shall undertake the latest quarterly and annual result. However, the EBID figure shall be for the last financial year.

The direction has determined the figure for computing the incremental provisioning and capital requirements which are as follows:

Potential Loss or EBID ( in Percentage)	Incremental provisioning Requirements	Incremental Capital Requirements
Up to 15 %	0	0
15% to 30%	20 BPS	0
30% to 50%	40 BPS	0
50% to 75%	60 BPS	0
More than 75%	80 BPS	Risk weight + 25%

Further, the bank is required to calculate the incremental requirements on quarterly basis. 

For projects under implementation and the new entities, banks shall calculate the incremental provisioning and capital requirements based on projected average annual EBID for the three years from the date of commencement of commercial operations.

In the case of consortium arrangements, the consortium leader / bank having the largest exposure shall have the lead role in monitoring the unhedged foreign exchange exposure of entities.

Exemption / Relaxation (a) Banks shall have the option to exclude the following exposures from the calculation of UFCE:

(i) Exposures to entities classified as sovereign, banks and individuals.

(ii) Exposures classified as Non-Performing Assets.

(iii) Intra-group foreign currency exposures of Multinational Corporations (MNCs) incorporated outside India.

Provided that the bank is satisfied that such foreign currency exposures are appropriately hedged or managed robustly by the parent. (iv) Exposures arising from derivative transactions and / or factoring transactions with entities, provided such entities have no other exposures to banks in India.

Assessment of Unhedged Foreign Currency Exposure (UFCE):

The banks are further required to ascertain the UFCE by obtaining such information from the concerned entity on quarterly basis. Further, the information on UFCE supplied to the bank must be audited and certified by a statutory auditor of the entity.

DEFINITION OF BUSINESS

According to section 2(13) of the Income Tax Act, the term “business” is defined as any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture.”

The term `Business’ means an activity being carried on continuously and systematically by a person with the application of his labor or skill with a view to earn income. The expression “business” does not necessarily mean trade or manufacture only, it has a much wider meaning. Business simply means any economic activity being carried on for earning profits. In any business, repetition of transactions or continuity of similar transactions is not a necessary element. Transactions may not be regular in nature.

The following activities have been considered as ‘Business’:

• Advertising agent
• Clearing, forwarding and shipping agents
• Couriers
• Insurance agent
• Nursing home
• Stock and share broking and dealing in shares and securities
• Travel agent

DEFINITION OF PROFESSION 

The term ‘Profession’ is defined under Section 2(36) of the Act Profession also includes vocation which is only a way of living. “Profession” involves the idea of an occupation requiring purely intellectual skill or manual skill controlled by the skill of the operator, as distinguished from an operation which is substantially the production or sale or arrangement for the production or sale of commodities.

 Classification of any activity as ‘business’ or ‘profession’ will depend on the facts and circumstances of each case.

As per Section 44AA of the IT Act, the following have been considered as ‘Profession‘:

• legal,
• medical,
• engineering,
• architectural profession,
• the profession of accountancy,
• technical consultancy or
• interior decoration.

Further under Rule 6F and other professions notified thereunder, the following activities can also be considered as a ‘Profession‘:

(i) Authorized Representative,

(ii) Company Secretary,

(iii) Film Artists/Actors, Cameraman, Director including an assistant director; a music director, including an assistant music director, an art director, including an assistant art director; a dance director, including an assistant dance director; Singer, Story-writer, a screen-play writer, a dialogue writer; editor, lyricist and dress designer,

(iv) Information Technology.

DIFFERENCE BETWEEN BUSINESS AND PROFESSION

FAQs

1. Are Nursing Homes and Hospitals a Business or a Profession?

• If Nursing Home or Hospital is owned by an Individual then it will be treated as ‘Profession’. But if it is owned by a Company or a firm then it will be treated as ‘Business’ because an artificial body like a company or a firm cannot possess any personal skills required to practice in a profession.

2. Teaching institutes are Business or Profession?

• Same logic will be applicable in case of teaching institutes. Teaching is a profession as specified skills are required to teach any student/class. But in case of a teaching institution, it is an artificial body, and hence, it will be considered as a business. But a teaching institution can be considered as a Profession if it is owned by an individual.

Section 40(B) of Income Tax Act provides the maximum permissible amount payable to a partner in a partnership firm. The returns of a partner can be in the form of

• Interest on Capital: Interest payable to partners shall be in accordance with the terms of the partnership deed, however, it shall not exceed 12% per annum.
• Share of Profit
• Remuneration: Remuneration payable to partners shall be in accordance with the terms of the partnership deed

ESTIMATION OF INCOME OF PARTNER IN A FIRM

The partner’s share in the total income of firm is exempt in the hands of the partner and hence would not be included in his total income. And due to this exemption, he cannot set-off his share of profits a firm’s losses.

INTEREST PAYABLE TO PARTNERS

There are few conditions which shall be fulfilled in order to be eligible for interest payable under section 40(B):

• The interest payable by a firm to its partners should be authorized by and in accordance with the partnership deed.
• The interest payable by a firm to its partners should not be for a period falling prior to the date of such partnership deed authorizing the payment of such interest.
• Interest payable to partners has a maximum cap of 12% per annum. Firm cannot pay any more than the prescribed limit.

Note: Interest here means simple interest and not compounding interest.

CONDITIONS FOR DEDUCTION UNDER REMUNERATION:

Remuneration to partners includes salary, bonus, commission, etc. Following conditions need to be satisfied for claiming the deduction:

• Remuneration shall be allowed only to working partners. Working Partner is a partner who actively engages in conducting the business affairs of the firm.
• Remuneration must be authorized by partnership deed and according to the terms of partnership deed.  Clear directions must be specified in the partnership deed.
• Remuneration paid to the working partners will be allowed as deduction but it should belong to the period as specified in the partnership deed. It should be related to the period of the partnership deed.
• It is not allowed if tax is paid on presumptive basis under section 44AD or section 44ADA.
• Remuneration payable shall be within the maximum permissible limits (as mentioned below). This limit is for total salary to all partners and not for any single partner.

CALCULATION OF BOOK PROFIT FOR PARTNER’S REMUNERATION U/S 40(B)

Book profit means the net profit as shown in the profit and loss account which is computed according to the manner laid down in the chapter IV-D. Book profit is calculated after some adjustments which are mentioned below:

• Net profit as per profit and loss account
• Add remuneration/salary/bonus/commission if already debited
• Add Brought forward business loss, deduction under section 80C to 80U if debited to profit and loss a/c
• Deduct interest if it is not deducted
• Make adjustments for expenses as per section 28 to 44D.

AMOUNT OF DEDUCTION:

BOOK PROFIT (Rs.)	MAXIMUM DEDUCTIBLE AMOUNT (Rs.)
Loss	1,50,000
Profit upto Rs.3,00,000	90% of book Profit or Rs.1,50,000; whichever is more
More than Rs.3,00,000	60% of the Book profit

TAXABILITY IN THE HANDS OF PARTNERS:

Remuneration is taxable in hands of partners as Business Income. Note that remuneration to partners is distant from the share of profits payable to partner since share of profits is exempt,  but remuneration is taxable in the income of partners.

Budget 2022 has hardened the income tax filing norms for regular taxpayers. Under Union Budget 2022, Nirmala Sitharaman announced that the provision of updated return is available in Section 139(8A) of the Income Tax Act. The taxpayers now have a choice to rectify their income tax return by filing an Updated Income Tax Return. The new provision allows the taxpayers to update their ITRs within two years of filing, on payment of additional taxes, in case of errors or omissions.

The Central Board of Direct Taxes (CBDT) has now notified a new Form ITR-U for documenting updated Income Tax returns in which taxpayers will have to give specific justification for filing it along with the amount of income to be offered to tax. The new Form ITR-U will be available to taxpayers for filing updated income tax returns for 2019-20 and 2020-21 fiscals. 

WHO CAN FILE AN UPDATED ITR?

Any person eligible to update returns for FY 2019-20 and subsequent assessment years as per the relevant provisions of the IT Act can file the updated return via Form ITR-U. A taxpayer can file updated return only once for each assessment year.

WHAT DETAILS ARE REQUIRED TO BE MENTIONED IN ITR-U?

In ITR-U, the assessee needs to specify only the amount of additional income, under the prescribed income heads, on which tax is required to be paid. No detailed income break-up needs to be submitted, as in the case of filing regular ITR forms. The taxpayer must also determine the exact reason behind updating the return in ITR-U. Further, it is required to mention the challan details for the additional tax paid for the updated return.

PRESCRIBED DATE TO FILE FORM ITR-U

Form ITR-U can be filed only for the preceding two years of the end of relevant assessment year. The provisions of section 139(8A) have been notified and came into effect from the beginning of financial year 2022-23, hence, in the financial year 2022-23, returns for AY 2020-21 and AY 2021-22 can only be furnished under Updated return.

MANNER OF VERIFICATION OF UPDATED RETURN

Updated return shall be verified using Digital Signature Certificate (DSC) in case of political parties and companies who are liable for tax audit under section 44AB.

In other cases, the taxpayers have an option whether they want to file with Electronic Verification Code (EVC) or DSC.

WHAT ARE THE BENEFITS OF FILING UPDATED RETURN?

1) Taxpayer gets an additional time of 24 months to file Income Tax Return even after the due date of filing Original ITR, Belated ITR and Revised ITR have lapsed

2) Taxpayer can report any missed out incomes and pay tax on it thus reducing chances of future tax notices and litigations

3) Tax Liability and penalty under Updated Return is less than in case of proceedings for undisclosed income or income escaping assessment

CASES WHEN AN UPDATED RETURN OF INCOME CANNOT BE FURNISHED

The Form ITR-U cannot be filed in case of following reasons:

• The provision does not allow the taxpayer to file the updated return if there is no additional tax outgo.
• Where a search has been initiated under section 132 or requisition is made under section 132A of the Income-tax Act
• Where a survey has been conducted u/s 133A other than survey u/s 133(2A) of Income-tax Act
• Where any proceeding for assessment or reassessment or re-computation or revision of income is pending under the Income-tax Act
• Where the Assessing Officer has information for Blank Money law, Benami law, etc. in the relevant assessment year.
• Where any information is received under an agreement referred to in sections 90 or 90A of the Income-tax Act
• Where any prosecution proceedings are initiated under the Income-tax Act.

PENALTY ON FILING UPDATED RETURN – PAY ADDITIONAL TAX UNDER SECTION 140B OF INCOME TAX ACT

The taxpayer filing an Updated Return must also submit proof of payment of tax and penalty as per Section 140B of the Income Tax Act.

The provision requires that the taxpayer has to pay an additional 25 per cent interest on the tax due if the updated ITR is filed within 12 months, while interest will go up to 50 per cent if it is filed after 12 months but before 24 months from the end of relevant Assessment Year. Non-payment of additional tax would be considered as invalid, and hence no return would be updated.

Therefore, the taxpayers looking to update their returns for FY 2019-20 will need to pay the tax due and interest along with an additional 50 per cent of such tax and interest. For those looking to file an updated return for FY 2020-21, the additional amount will be 25 per cent of the tax payable and interest.

NOTE: In case the taxpayer has not filed the Original return or Belated return, he/she will have to pay the taxes due for the relevant assessment year along with the late fees as per section 234F. He/she shall also pay the additional tax liability under section 140B of 25%/50% on the taxes due as per the circumstances.

UPDATED ITR U/S 139(8A) V/S REVISED ITR U/S 139(5)?

• A taxpayer can file an Updated ITR even if an original or belated ITR has not been filed. However, the taxpayer cannot file a Revised ITR if an original or belated ITR has not been filed
• The taxpayer can file an Updated ITR only if there is an additional tax liability. In the case of a Revised ITR, there is no such restriction
• The taxpayer need not pay any penalty for filing a Revised ITR. However, the taxpayer must pay a penalty in form of an Additional Tax of 25% to 50% as per Section 140B for filing an Updated ITR
• Updated ITR can be filed only if there is an additional tax liability and not if there is a reduction in tax liability or an increase in the refund or claiming a loss. Revised ITR can be filed for multiple reasons such as claiming a loss, increasing refund, reduction or increase in tax liability, etc.
• The taxpayer can file Revised Return multiple times while he/she can file Updated ITR only once.

WHAT IS ANGEL TAX?

Angel tax essentially derives its genesis from section 56(2) (vii) (b) of the Income Tax Act, 1961. Angel Tax is the tax levied by the government on the start-ups who receive funding from Angel Investors.

Angel investors get benefits in the form of taxation as the entire investment made by investors is not taxed. Angel tax is imposed on the capital raised by the means of issue of shares by unlisted companies from an Indian investor if the share price of issued shares exceeds the fair market value of the company. The excess realization is considered as income and therefore, taxed accordingly under the head ‘Income from other Sources’.

Note that Angel Tax isn’t applicable in case of investments made by Venture Capital Firms or Foreign Investors. It’s limited to investments made only by Indian Investors.

WHO IS AN ANGEL INVESTOR?

An Angel Investor is a high-net-worth individual who provides financial backing for small start-ups or entrepreneurs, typically in exchange for ownership equity in the company. They are also known as a private investor, seed investor or angel funder. The funds that Angel Investors provide may be a one-time investment to assist the business get off the ground or an ongoing injection to support and carry the company through its difficult beginning stages. Angel investors usually give financial support to start-ups at the initial moments (where the risk of failing is relatively high) and when most investors are not prepared to back them up. They are the one who invests his money in a startup while it is still finding its feet and still struggling to establish itself in the marketplace.

As per the Income Tax Notification, Angel Investors with the minimum net worth of INR 2 crore or the average return of the income of more than INR 25 lakhs in the preceding 3 financial years will be eligible for full tax exemption (100%) on the investments that are made in the start-ups above the fair market value.

PURPOSE BEHIND ANGEL TAXATION:

The primary reason for the introduction of the ‘Angel Tax’ was to tax the excessive share premium received over and above the fair market value (FMV) by the private companies, which was widely being used as a mechanism for disclosure for unaccounted money or black money. Thus, this is one of the anti-abuse provisions introduced to prevent money laundering.

One more explanation for this is since just a minor level of the population follows the tax collection necessities (which include just 2% of the complete population), a large portion of the new businesses don’t keep up with legitimate books of record and show of their assets legibly. Due to this flaw, the income tax department of India is of view that the valuation of companies needs to be done by special officers based on prescribed guidelines and formulas. This will assist the department to do the proper valuation of assets of the company, which shall further lead to higher tax payment.

ANGEL TAX RATE

Angel Tax is levied on the start-ups at a rate of 30% (excluding cess) on the Premium received. The Premium here is calculated as the difference between the net investments in excess of the fair market value.

ELIGIBILITY CRITERIA FOR STARTUP RECOGNITION:

In order to be eligible for acquiring funds by Angel Investors, the company (start-ups) need to meet certain criteria, i.e.:

i. The Start-up should be incorporated as a private limited company or enlisted as a partnership firm or a limited liability partnership.

ii. An entity shall be considered as a start-up up to 10 years from the date of its incorporation.

iii. Turnover should be less than Rs.100 Crores in any of the preceding financial years.

iv. The company remains a start-up if the turnover per year does not cross the Rs 100 crore marks in any of the 10 years. Once the company crosses the limit, it no longer remains eligible to be called a Start-Up. The limit of Rs 100 crore has been upgraded from Rs.25 crore by the Indian government in the recent past.

v. Further in the calculation of threshold of INR 25 crores, the amount of paid-up share capital and share premium in respect of shares issued to any of the following persons will not be included:

• A Non-resident or

• A Venture Capital Company pr
• A Venture Capital Fund

vi. The firm should have approval from the Department for Promotion of Industry and Internal Trade (DPIIT)

vii. The Start-up should be working towards innovation/ improvement of existing products, services and processes and should have the potential to generate employment/ create wealth.

viii. An entity formed by splitting up or reconstruction of an existing business shall not be considered a “Start-up.”

BENEFITS AVAILABLE TO AN ELIGIBLE START-UP:

Following benefits shall be available to an eligible start-up or its shareholders:

1. Exemption from levy of angel tax under Section 56(2) (vii) (b);

2. Deductions under Section 80-IAC of the income tax Act

3. Liberalized regime of Section 79 to carry forward and set-off the losses

4. Exemption under Section 54GB to the shareholder for making investment in a startup;

5. Access to the dedicated cell created by the CBDT to resolve the issues faced by the Start-Ups.

SECTION 80(IAC):

Tax Exemption under Section 80 IAC of the income Tax Act, 1961: A Start-up may apply for Tax exemption under section 80 IAC of the Income Tax Act. Post getting clearance for Tax exemption, the Start-up can avail tax holiday for 3 consecutive financial years out of its first 10 years since incorporation.

Eligibility Criteria for applying to Income Tax exemption (80IAC):

• The entity should be a recognized Start-up;
• Only Private limited or a Limited Liability Partnership is eligible for Tax exemption under Section 80IAC;
• The Start-up should have been incorporated after 1st April, 2016 but before April 1, 2021

Profit Exemption to eligible Start-up entities under Section 80-IAC:

100% of its profits and gains is allowed as deduction to an eligible start-up for 3 consecutive assessment years out of the 10 years (beginning from the year of incorporation).

As per Section 80-IAC, an entity shall be considered as an eligible start-up if it satisfies the following criteria:

• It is incorporated as a company (Private Ltd. Co. or Public Ltd. Co.) or an LLP.
• It is incorporated on or after April 1, 2016 but before April 1, 2021.
• Its turnover does not exceed Rs.25 Cr (Rs.100 Cr from 01.04.2020) in the previous year relevant to assessment year for which such deduction is claimed.
• It is not formed by splitting up or reconstruction of a business already in existence.
• It holds a certificate of eligible business from the Inter-Ministerial Board of Certification.
• It is engaged in innovation, development or improvement of products or processes or services or a scalable business model with a high potential of employment generation or wealth creation.

SECTION 56:

ANGEL TAX UNDER SECTION 56(2) (VII) (B) OF THE INCOME TAX ACT –

Angel tax is the tax charged on the closely held company when it issues shares to any resident of India at a price which exceeds its fair market value. When this provision is triggered, the aggregate consideration received from issue of shares which exceeds its fair market value is charged to tax under the head ‘Income from other sources’ under section 56(2) (vii) (b).

TAX EXEMPTION UNDER SECTION 56 OF THE INCOME TAX ACT (ANGEL TAX)

Post getting recognition, a Start-up may apply for Angel Tax Exemption. A start-up shall be eligible for claiming exemption from levy of angel tax under section 56(2) (vii) (b) if following conditions are satisfied:

• The entity should be a recognized Start-up;
• Aggregate amount of paid-up share capital and share premium of the Start-up after the proposed issue of share, if any, does not exceed INR 25 Crore.

CONDITIONS FOR EXEMPTION FROM ANGEL TAX TO BE FULFILLED

An eligible start-up shall get exemption from Angel Tax as given u/s 56(2) (vii) (b). However, the exemption is provided subject to the condition that the start-up should not invest, within 7 years from the end of the latest financial year in which the shares are issued at a premium, in any of the following:

• Building or land for the purpose (other than own use or as stock in trade or for the purpose of renting);
• For advancing loans (other than where the lending of money is the substantial part of the business of the start-up);
• Capital contribution to any other entity;
• Shares and securities;
• Motor Vehicle, aircraft, yacht, or any other mode of transport, the actual cost of which exceeds INR 10 Lakhs (other than that held by the start-up for the purpose of plying, hiring, leasing, or as stock-in-trade, in the ordinary course of business;
• Jewelry (other than that held by the start-up as stock in the ordinary course of business);
• Archaeological collections & Artifacts etc.

PROBLEMS WITH ANGEL TAX:

According to the Income Tax Laws of India, 30% of the investment made to a start-up is charged in the form of Angel Tax. This implies that a start-up is losing almost around 33% of the investment made to it in the form of tax. Angel tax is taking a huge toll on start-ups. A start-up company already has a lot on its plate. They have problems to handle and losing a tremendous portion of their investment in the form of tax is just not acceptable.

There are many reasons due to which startups are opposing this concept of angel taxation along with investors. As investors are reluctant to invest in Indian startups due to this concept, it imposes higher tax amount on them. Certain reasons are as mentioned below:

• Payments made by Indian Residents are only liable for Angel tax. This means that if a start-up is funded by a resident Indian, then the start-up has to pay a certain share of this investment in the form of angel tax.
• Investments made by non-resident investors and venture capitalists are not liable for Angel Tax deduction.
• Angel taxation has halted the development and growth of startups, leaving them disheartened.
• Due to large amount of taxation to be paid, many investors are avoiding making an investment in the market which has a huge impact on Indian industries as many large investors are avoiding funding due to the reason.
• The imposition of angel tax hinges on the fair market valuation of the company and this has been a bone of contention between startups and the income tax department. The tax department goes by the rule book and calculates market value based on the net assets of the company. However, estimated growth prospects of the startup and future projections based on these growth prospects are major factors in determining the fair market valuation of the startup. The methodology difference in calculation of the market value of the startup makes it pay a hefty price in terms of angel tax at a whopping 30%. Angel tax in a way wipes away a major part of the investible surplus of the startup hurting its growth prospects and hitting hard on the viability of the business.

However, after facing a sustained backlash from the startup ecosystem against the imposition of angel tax, the government has finally assured the startups that no coercive action will be taken to collect angel tax and also appointed a committee to look into this issue.

WHAT ARE INITIATIVES TAKEN BY THE GOVERNMENT IN THIS REGARD?

To advance the startup industry, the government has taken some steps with regard to Angel Taxation as:

• Earlier, a company was regarded as a startup for a period of 7 years from the date of its incorporation. But now it has been increased to 10 years in order to provide benefits in terms of income tax for a further three years.

• Further, the limit for turnover has also increased from Rs.25 crores to rs.100 crores for the said financial year for the criteria to be regarded as a Start-up company.

In the case said entities meet the criteria as defined by the government, then exemption from angel taxation shall be given.

CONCLUSION

Regardless the fact that Angel tax was started with good intention, it has experienced many kickbacks. Angel Tax is deeply disapproved of by start-ups and investors alike. This has brought about a precarious decrease in the advancement of start-ups as they have spare funding. Investors, on the other hand, are also shying away from making investments in small companies. There are still many challenges that Startups and Investors are facing. This has completely disturbed the equilibrium and has made start-up survival all the tougher.