The government has announced that there would be no angel tax levied on the startups that are registered with the Division for Promotion of Business and Internal Trade (DPIIT).
The move will advantage 21.417 startups across India, that are registered with the government physique.
Section 56 (two) viib of the Earnings Tax Act, which had come to be identified as the angel tax, counted any investment above the fair industry worth of shares as revenue from other sources and was taxes accordingly.
“We have issued numerous circulars and will situation additional if required. The anti-abuse provision will not apply to startups registered with DPIIT,” Ajay Bhushan Pandey, income secretary mentioned.
As a outcome of this provision, in November 2018, the Ministry of Customer Affairs (MCA) issued notices to additional than two,000 startups that had raised funds because 2013.
Any startup with any revenue tax problems can strategy the cell for a fast resolution.
The finance minister also announced a devoted cell below the Central Board of Direct Taxes (CBDT) to address startup problems.
For the duration of the spending budget in July, the finance minister had mentioned that in order to resolve the situation of angel tax, entrepreneurs and investors who file requisite declarations and present information and facts on returns will not be topic to scrutiny on the valuation of share premium below the act.
The estimates say that there are about 50,000 startups current in India, as of date.
“The government has been pro-active in addressing the issues of startups and has taken a quantity of measures in the current previous in this path. Removal of angel tax will go a lengthy way in constructing trust and self-assurance in the startups and the investors, and shows the government’s resolve towards ease of performing small business in India and encourage entrepreneurship,” mentioned Vikas Vasal, Companion & National Leader – Tax, Grant Thornton India.