Deal Structuring
Non-Compete Covenant
A restriction on the seller starting or joining a competing business post-sale — sellers should ensure any non-compete fee is separately valued and correctly taxed.
Seller Example
Promoter selling a Coimbatore textile export unit for ₹22 Cr negotiates a ₹1.5 Cr non-compete fee carved out separately (taxed under Section 28(va) as business income) rather than folded into overall capital gains, while narrowing the restriction to 3 years and the specific export geography instead of accepting the buyer's initial 10-year pan-India demand.