Rs 105 Dividend + Rs 35 Special Dividend: ICRA's record date is nearing; check if you're eligible for the bumper payout

Rs 2.50 dividend: This wire stock fixes record date for FY26 payout; check key details

E20 petrol: Will it affect your motor insurance claim? Government clarifies insurance, warranty rules

11x12x20 SIP Formula: In how many years can your Rs 11,000 monthly investment grow to over Rs 1 crore using the formula?

Good news for rail passengers: 3 bullet train corridors announced for Hyderabad; check routes

SIP vs Sukanya Samriddhi Yojana: Which can create a bigger corpus with Rs 12,500 monthly investment in 15 years?

400% dividend per share by AMC, record date on July 14

LTM Q1 FY27: Top line at Rs 11,608 crore, operationally strong show—Key takeaways for investors

​ITR Filing 2026: Penalties, refund delays and consequences of not filing Income Tax Return

Big BIS update! These 4 Indian Standards have changed; check the full list

<p>For anyone investing in IPOs or tracking startup stocks, Zerodha founder  and CEO Nithin Kamath has offered a striking explanation for why many venture-backed firms prefer losses over profits — and how India’s tax structure may be quietly driving that behaviour.</p>
<p>In a detailed post on X, Kamath pointed out that taking money out of a business through dividends attracts an effective tax rate of 52 per cent — a combination of 25 per cent corporate tax and 35.5 per cent personal income tax. </p>
<blockquote><p dir="ltr" lang="en" xml:lang="en">If you take money out of a business as dividends, the effective tax rate is 52% (25% corporate tax + 35.5% on personal income). Through capital gains, it's just 14.95% (with cess).</p>
<p>Why does this matter? Here’s what you should know if you invest in IPOs.</p>
<p>If you're an investor…</p>
<p>— Nithin Kamath (@Nithin0dha) <a href="https://twitter.com/Nithin0dha/status/1985316723533435191?ref_src=twsrc%5Etfw">November 3, 2025</a></p></blockquote>
<script async="" src="https://platform.twitter.com/widgets.js" charset="utf-8"></script><p>By contrast, capital gains on share sales are taxed at just 14.95 per cent (including cess). That gap, Kamath said, explains why venture capital investors often favour growth spending and valuation gains over profitability.</p>
<h2><strong>The tax gap that drives startup incentives</strong></h2>
<p>Kamath explained that if an investor withdraws money from a business as dividends, the effective tax rate can go up to 52 per cent — 25 per cent corporate tax plus 35.5 per cent on personal income. However, capital gains on share sales attract just 14.95 per cent, including cess.</p>
<p>“If you're an investor, especially a VC, the math is simple reduce corporate tax by showing minimal profits or losses, spend on acquiring users, build a growth narrative, and then sell shares at a higher valuation while paying much lower tax,” Kamath wrote.</p>
<p>This tax differential, he noted, pushes venture-backed startups to spend aggressively and delay profitability, creating a cycle where fast growth is rewarded more than financial discipline.</p>
<h2><strong>A system that rewards unprofitable growth</strong></h2>
<p>Kamath described this behaviour as a “tax arbitrage game” that has shaped India’s startup ecosystem. Most VC-backed companies listed in recent years, he said, show little or no profit for this very reason.</p>
<p>“Unprofitable growth gets valued at much higher multiples than steady profits,” he noted. “A company doing Rs 100 crore revenue with 100 per cent growth might get valued at 10–15x, while a profitable one with 20 per cent growth gets 3–5x. So VCs aren't just saving on tax, they're creating a 3x higher exit valuation.”</p>
<h2><strong>IPOs as the only exit route</strong></h2>
<p>With limited merger and acquisition opportunities in India, Kamath said IPOs have become the default escape hatch for investors seeking returns after years of funding startups.</p>
<p>“Every startup faces constant pressure from VCs for an exit. With almost no M&amp;A opportunities in India, IPO is often the only way out,” he said. Once companies get trapped in this high-spending cycle, Kamath warned, it becomes extremely difficult to shift gears toward sustainable profitability.</p>
<p>Kamath acknowledged that the government’s tax design may have been intended to encourage reinvestment, not hoarding. However, he cautioned that it might also be creating fragile, cash-hungry businesses.</p>
<p>“It’s creating companies that aren’t very resilient. One prolonged market downturn, and many of these unprofitable companies would struggle to survive,” he warned.</p>
<p>He added that India’s low R&amp;D spending — just 0.7 per cent of GDP — makes the problem more structural, as much of the so-called “growth spending” doesn’t translate into innovation.</p>
<h2><strong>Valuations driven by tax design, not fundamentals</strong></h2>
<p>Kamath concluded that the imbalance between tax on dividends and capital gains has inadvertently encouraged a system where valuation growth trumps profitability. India’s IPO boom, he suggested, is as much a reflection of this tax-driven incentive structure as it is of the country’s entrepreneurial ambition.</p>


For anyone investing in IPOs or tracking startup stocks, Zerodha founder  and CEO Nithin Kamath has offered a striking explanation for why many venture-backed firms prefer losses over profits — and how India’s tax structure may be quietly driving that behaviour.In a detailed post on X, Kamath pointed out that taking money out of a business through dividends attracts an effective tax rate of 52 per cent — a combination of 25 per cent corporate tax and 35.5 per cent personal income tax. If you take money out of a business as dividends, the effective tax rate is 52% (25% corporate tax + 35.5% on personal income). Through capital gains, it's just 14.95% (with cess).Why does this matter? Here’s what you should know if you invest in IPOs.If you're an investor…— Nithin Kamath (@Nithin0dha) November 3, 2025By contrast, capital gains on share sales are taxed at just 14.95 per cent (including cess). That gap, Kamath said, explains why venture capital investors often favour growth spending and valuation gains over profitability.The tax gap that drives startup incentivesKamath explained that if an investor withdraws money from a business as dividends, the effective tax rate can go up to 52 per cent — 25 per cent corporate tax plus 35.5 per cent on personal income. However, capital gains on share sales attract just 14.95 per cent, including cess.“If you're an investor, especially a VC, the math is simple reduce corporate tax by showing minimal profits or losses, spend on acquiring users, build a growth narrative, and then sell shares at a higher valuation while paying much lower tax,” Kamath wrote.This tax differential, he noted, pushes venture-backed startups to spend aggressively and delay profitability, creating a cycle where fast growth is rewarded more than financial discipline.A system that rewards unprofitable growthKamath described this behaviour as a “tax arbitrage game” that has shaped India’s startup ecosystem. Most VC-backed companies listed in recent years, he said, show little or no profit for this very reason.“Unprofitable growth gets valued at much higher multiples than steady profits,” he noted. “A company doing Rs 100 crore revenue with 100 per cent growth might get valued at 10–15x, while a profitable one with 20 per cent growth gets 3–5x. So VCs aren't just saving on tax, they're creating a 3x higher exit valuation.”IPOs as the only exit routeWith limited merger and acquisition opportunities in India, Kamath said IPOs have become the default escape hatch for investors seeking returns after years of funding startups.“Every startup faces constant pressure from VCs for an exit. With almost no M&amp;A opportunities in India, IPO is often the only way out,” he said. Once companies get trapped in this high-spending cycle, Kamath warned, it becomes extremely difficult to shift gears toward sustainable profitability.Kamath acknowledged that the government’s tax design may have been intended to encourage reinvestment, not hoarding. However, he cautioned that it might also be creating fragile, cash-hungry businesses.“It’s creating companies that aren’t very resilient. One prolonged market downturn, and many of these unprofitable companies would struggle to survive,” he warned.He added that India’s low R&amp;D spending — just 0.7 per cent of GDP — makes the problem more structural, as much of the so-called “growth spending” doesn’t translate into innovation.Valuations driven by tax design, not fundamentalsKamath concluded that the imbalance between tax on dividends and capital gains has inadvertently encouraged a system where valuation growth trumps profitability. India’s IPO boom, he suggested, is as much a reflection of this tax-driven incentive structure as it is of the country’s entrepreneurial ambition.

Kamath explained that if an investor withdraws money from a business as dividends, the effective tax rate can go up to 52 per cent — 25 per cent corporate tax plus 35.5 per cent on personal income.

 ‘It’s not about profit anymore’: Zerodha CEO Nithin Kamath explains why unprofitable startups get higher valuations

news-it-s-not-about-profit-anymore-zerodha-ceo-nithin-kamath-explains-why-unprofitable-startups-get-higher-valuations-382489

For anyone investing in IPOs or tracking startup stocks, Zerodha founder  and CEO Nithin Kamath has offered a striking explanation for why many venture-backed firms prefer losses over profits — and how India’s tax structure may be quietly driving that behaviour. In a detailed post on X, Kamath pointed out that taking money out of a business through dividends attracts an effective tax rate of 52 per cent — a combination of 25 per cent corporate tax and 35.5 per cent personal income tax.  If you take money out of a business as dividends, the effective tax rate is 52% (25% corporate tax + 35.5% on personal income). Through capital gains, its just 14.95% (with cess). Why does this matter? Here’s what you should know if you invest in IPOs. If youre an investor… — Nithin Kamath (@Nithin0dha) November 3, 2025 By contrast, capital gains on share sales are taxed at just 14.95 per cent (including cess). That gap, Kamath said, explains why venture capital investors often favour growth spending and valuation gains over profitability. The tax gap that drives startup incentives Kamath explained that if an investor withdraws money from a business as dividends, the effective tax rate can go up to 52 per cent — 25 per cent corporate tax plus 35.5 per cent on personal income. However, capital gains on share sales attract just 14.95 per cent, including cess. “If youre an investor, especially a VC, the math is simple reduce corporate tax by showing minimal profits or losses, spend on acquiring users, build a growth narrative, and then sell shares at a higher valuation while paying much lower tax,” Kamath wrote. This tax differential, he noted, pushes venture-backed startups to spend aggressively and delay profitability, creating a cycle where fast growth is rewarded more than financial discipline. A system that rewards unprofitable growth Kamath described this behaviour as a “tax arbitrage game” that has shaped India’s startup ecosystem. Most VC-backed companies listed in recent years, he said, show little or no profit for this very reason. “Unprofitable growth gets valued at much higher multiples than steady profits,” he noted. “A company doing Rs 100 crore revenue with 100 per cent growth might get valued at 10–15x, while a profitable one with 20 per cent growth gets 3–5x. So VCs arent just saving on tax, theyre creating a 3x higher exit valuation.” IPOs as the only exit route With limited merger and acquisition opportunities in India, Kamath said IPOs have become the default escape hatch for investors seeking returns after years of funding startups. “Every startup faces constant pressure from VCs for an exit. With almost no M A opportunities in India, IPO is often the only way out,” he said. Once companies get trapped in this high-spending cycle, Kamath warned, it becomes extremely difficult to shift gears toward sustainable profitability. Kamath acknowledged that the government’s tax design may have been intended to encourage reinvestment, not hoarding. However, he cautioned that it might also be creating fragile, cash-hungry businesses. “It’s creating companies that aren’t very resilient. One prolonged market downturn, and many of these unprofitable companies would struggle to survive,” he warned. He added that India’s low R D spending — just 0.7 per cent of GDP — makes the problem more structural, as much of the so-called “growth spending” doesn’t translate into innovation. Valuations driven by tax design, not fundamentals Kamath concluded that the imbalance between tax on dividends and capital gains has inadvertently encouraged a system where valuation growth trumps profitability. India’s IPO boom, he suggested, is as much a reflection of this tax-driven incentive structure as it is of the country’s entrepreneurial ambition.