I-T breather to help loss-making firms conserve working capital

economictimes.indiatimes.com:

Income Tax Act proposed in the budget could help loss-making companies with high cash burn, including startups, conserve working capital, tax experts and lawyers said.

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This comes at a time when several consumer internet companies and larger startups in India are aiming to achieve profitability amid a slowdown in risk capital funding.

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Under Section 194Q of the Income Tax Act, 0.1% of the payment made by a company–exceeding Rs 50 lakh–towards purchase of any goods is to be withheld as tax deducted at source (TDS).

If the company is loss-making, it can claim a refund of this tax, since the actual tax liability is lower than the TDS it is paying. However, this results in working capital getting blocked.

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“Most of the startups burn cash during their initial phase of operations, which results in high