Would Zerodha still be in business then?: Ashneer Grover challenges Nithin Kamath’s tax logic

A sharp tax critique by Zerodha co-founder Nithin Kamath has triggered a public clash with BharatPe’s Ashneer Grover and opened a new front in the debate over whether India’s startup scene is building real businesses or just chasing big exits.

Kamath, posting on X, broke down how India’s tax structure pushes startups to prioritize capital gains over profitability. He explained that drawing profits as dividends can result in a total tax hit of up to 52%, while selling shares attracts just 14.95% in capital gains tax.

“If you’re an investor (especially a VC), the math is simple,” Kamath wrote. “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.”

That post drew immediate fire from Grover, who challenged the premise. “Bhai – is logic se all investors should invest in a business and wait for returns as dividend only rather than selling and realising capital gain,” he replied. “Would Zerodha / any other broker still be in business then?”

Grover’s point: if capital gains are so favored, trading platforms like Zerodha wouldn’t survive on dividend-focused investors alone. His rebuttal spotlighted a paradox in the system and a growing rift in how industry leaders view success.

Kamath, however, wasn’t just making a tax argument. He warned that the current incentives, though possibly designed to fuel growth, have created a culture of cash burn. Startups chase users and valuations, often pushing out smaller players, but become fragile in the process — overly reliant on outside capital, with few mergers or acquisitions to offer stable exits.

With IPOs as the primary off-ramp for investors, Kamath suggested the model may be flawed: “The system might have gone too far.”