The Department of Industrial Policy and Promotion (DIPP) Thursday sought views from stakeholders for better implementation of the recently announced procedure for startups to seek angel tax exemption.
On January 16, the government eased the procedure for seeking income tax exemption by startups on investments from angel funds and prescribed a 45-day deadline for a decision on such applications.
"The department has issued a notification for exemption on angel tax.
Suggestions are invited for better implementation of the recently announced angel tax exemption framework," DIPP said in a tweet.
The move comes against the backdrop of various startup founders claiming that they have received notices under Section 56(2) (viib) of the Income Tax Act from the I-T department to pay taxes on angel funds raised by them. Entrepreneurs have raised concerns over these tax notices.
The new procedure says that to seek the exemption, a startup will apply, with all the documents, to the DIPP. The application of the recognised startup shall be moved by the department to the Central Board of Direct Taxes (CBDT) with necessary documents.
Earlier the procedure was carried out by an inter ministerial board of certification.
The earlier requirement of startup to submit report from merchant banker specifying the fair market value of shares has also been removed.
A startup which is recognised by the DIPP would be eligible to seek the exemption, subject to certain conditions.
Startups will have to provide account details and return of income for last three years. Similarly, investors would also have to give its net worth details and return of income.
Section 56(2) (viib) of the Income Tax Act provides that the amount raised in excess of a startup's fair market value is taxed at 30 per cent as income of the firm from other sources.
The government launched the Startup India initiative in January 2016 to build a strong ecosystem for nurturing innovation and entrepreneurship.
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