Angel Tax relief

In a step to partly address start-up woes and ease of doing business, the Government has widened the definition of start-ups and has eased exemption rules according to an official release circulated by the Commerce & Industry Ministry on February 20. An entity will now be considered as a start-up up to 10 years from its date of incorporation instead of the existing period of 7 years. The Government has also expanded the turnover criteria. A firm can now be a start-up even if its turnover for any of the financial years since its incorporation hasn’t exceeded Rs 100 crore instead of the existing cap of Rs 25 crores. Currently the limit for tax exemption is Rs 10 crores.

Considerations of shares received by eligible start-ups for shares issued or proposed to be issued by all investors shall be exempt up to an additional limit of Rs 25 crore. The announcement follows the Government having setup a working group consisting of angel investors and start-up founders to look into issues faced by angel investors.

This followed protests by investors that the Government’s angel tax notification on January 16 to check misuse of the tax exemption would also hurt genuine start-ups.

More relief is expected by way of the Central Board of Direct Taxes planning to issue a notification asking tax officers to “accept valuation certificates” submitted by the start-ups who have already been issued angel tax notices