Podcast | Pick of the day - Attention startups: The devil of angel tax is exorcised
21 Feb 2019 8:06 AM GMT
But he may still live in the details. Hits and misses from the new rulebook.
- In a move that could reduce the negative impact of angel tax on the startup ecosystem, the Ministry of Commerce and Industry, on the 19 February, widened the definition of a “startup,” perhaps making it easier for investors to invest in these companies.
- Priyanka Sahay, writing for Moneycontrol, noted that many startups who raised angel investments in assessment year 2015-16 and 2016-17, received notices from the Income Tax department under this Act.
- One survey conducted by LocalCircles and the Indian Private Equity & Venture Capital Association (IVCA) found that 73% of startups that raised capital between Rs 50 lakh to Rs 2 crore in India had received angel tax notices from the Income Tax Department till January.
- As the per new notification, investment from non-resident Indians as individuals, alternative investment funds (category I) and listed Indian companies with net worth of at least Rs 100 crore (or turnover of at least Rs 250 crore) have been exempted from the angel tax net.
- Category I registered with SEBI will be exempted under Section 56(2)(viib) of Income Tax Act beyond the limit of Rs 25 crores.
- Considering most startups take years to even start breaking even, treating money that came in from angel investors as taxable income seemed a rather draconian idea, and one that the startup ecocsystem, perhaps rightly, railed against.
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