Walmart-Flipkart Deal | Trouble for Bansal Buddies
It won’t be wrong to say that the founders of a Startup are the most stressed person in their company. They leave all their comforts and do hard work day and night just for one cause – one day their company will reach a great height. They have to take care of everything. From generating business to paying salary, from taking strategic decisions to solving internal matters and the list is literally endless. This fact can be proved by the recent “Walmart-Flipkart Deal”. Although it made Bansal Buddies billionaires overnight but at same time it also gave them a nightmare.
In this blog, we’ll tell you all about the Walmart-Flipkart Deal. And why it got a nightmare by the Income Tax Department.
What was Flipkart Walmart Deal?
In August 2018, Flipkart entered into an agreement with retail king Walmart to sell 77% of its stake $16 Billion. As per the reports, almost 44 major shareholders like eBay, SoftBank, Sunny Bansal, Binny Bansal etc sold their shares.
What was Tax Implication of Walmart on this deal?
Complying with the TDS provisions applicable on the sale, Walmart deposited withholding tax of ₹7,439 crores to the government.
What was Tax Implication on Bansal Buddies on this deal?
As per the Income Tax Act, global income of an Indian resident assessee is taxable in India. Since Sachin and Binny Bansal are Indian residents who sold their stake to Walmart, provisions of taxation are attracted to such sale.
In Flipkart Deal, the Bansal Buddies are required to pay 20% tax on capital gains (being long-term capital gains) they’ve earned from the sale of their shares in the company. As a result, the Income Tax Department has issued the notice to both of them asking details of the sale and when they will be depositing advance tax.
Why Deposit Advance Tax?
Law states that an Indian whose income tax in a FY exceeds ₹10,000 has to deposit advance tax. This tax has to be paid by certain due dates. In Flipkart Deal, Bansal Buddies have to deposit 75% of tax by 15th December 2018 and 100% by 31st March 2019.
Any delay in payments of advance tax by due dates attracts interest payment u/s 234B & 234C. Interest at the rate of 1 % per month is applicable in case of non-compliance.
Now what needs to be seen is, how the Bansal Buddies will reply to the income tax notices served upon them due to Walmart-Flipkart Deal. But one thing which is sure, a businessman has to handle a lot of troubles. First in making his work successful and then dealing with government rules.
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Happy Filing 🙂