Angel tax exemption cap hiked, definition of startup widened

Angel tax exemption cap hiked, definition of startup widened
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  • Angel tax, the focus of a recent controversy, which has come to be called so since it largely impacts angel investments in startups, refers to income tax payable on capital raised by unlisted companies via issue of shares, where the share price is seen in excess of the fair market value.
  • Section 56(2)(viib) of the Income Tax Act provides that the amount raised by a startup in excess of its fair market value is taxable at over 30 per cent.
  • An entity shall be considered a startup up to 10 years from its date of incorporation instead of the existing period of 7 years," Prabhu tweeted.
  • "All investments into eligible startups by non-residents, alternate Investment Funds -- Category I registered with market regulator Sebi -- shall also be exempt under Section 56(2)(viib) of the Income Tax Act beyond the limit of Rs 25 crore," he said.


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