Getting funds for small and marginal businesses is a task. Investors are interested in something other than investing their hard-earned money in a company that may bloom or may be risky. But these small business owners are the new brands in the business mart. In order to increase the funding percentage in these small businesses. Authorities provide investors of small businesses or industries some relaxation in tax. So even if any loss occurs, the loss would be borne by the authorities, And the investor would get compensation. It led to a significant splurge in small enterprise funding. However, many still need to learn how it functions. In this article, discuss what you need to keep in mind while dealing with EIS shares.
Reliefs Available Under EIS
No limit has been set for investors to purchase the EIS in a financial year. Investors will get up to 30% of relief in the tax payment system. The minimum investment amount is one million Euros for the government’s tax incentive to apply. Additionally, an investor can deduct 30% of the first 1,000,000 EUR invested in a knowledge-intensive company. Now the question here arises: How will one know which company is knowledge-intensive? For this, one can always visit the EIS shares scheme. Suppose an investor holds a share for up to three financial years. In that case, he can claim the capital gain tax disposal. On the other hand, if the shares are disposed of at a loss. Then the tax reduction he’ll receive will be the remaining amount after deducting the tax relief from the previous financial year.
EIS Investment Direct Or Via Funds
As we have already discussed, this small enterprise is the future brand of the business marts; therefore, they do have a full-blown conversion smoothly so they may reach their full potential. However, funding is needed to ensure, as we all know, welfare work held by the state; investors are only concerned about their profit and returns. Now here, for selling EIS shares, the company itself has to make sure it fulfills the mentioned conditions for it to be able to sell the EIS shares. Investors can invest directly or via funds to be the beneficiary of the EIS scheme. The method to use is completely the investor’s personal choice, which may include their far-sightedness, confidence in the investing company’s product, future prediction regarding the said sector of the industry, and so on.
Moreover, EIS via a fund enables the investor the diversification of capital. Let’s, for example, assume an investor is interested in finance and climate change. He could invest in a startup bank and a cleantech enterprise, thus fully satisfying the binal interests of the investor.
For the investor to receive the benefit of the EIS scheme, one needs to fill in some documents that validate his statement of investing in EIS shares. Here is a point that needs to be taken care of if the company is expelled from its EIS status. The investor holds no claim on the relief promised by the authorities. Till now, no such case has been observed, but one never knows what the future holds, and being careful doesn’t cost cents.