The Central Board of Direct Taxes (CBDT) has not set up the back-end infrastructure required to automatically exempt registered start-ups from angel tax.However,CBDT has asked its officers to avoid taking coercive measures against companies that have received notices under the angel tax.
Angel Tax is a 30% tax that is levied on the funding received by startups from an Angel investor.However, this 30% tax is levied when startups receive angel funding at a valuation higher than its ‘fair market value’. It is counted as income to the company and is taxed.
Angel funds refers to a money pool created by high net worth individuals or companies (generally called as angel investors),for investing in business startups.They invest at very early-stage of businesses where other institutional investors such as venture capital funds or private equity funds hesitate to invest
Earlier,government had relaxed the norms under the definition of Start-Ups.The changes brought in were:(a) The investment limit of angel investors to seek exemption under the Income Tax Act, 1961 has been increased to Rs 25 crore from 10 Crore.(b) An entity shall be considered as a startup up to 10 years from its date of incorporation instead of the previous period of 7 years and (c) An entity will be considered a startup up to a turnover of Rs 100 crore as against the earlier limit of Rs 25 crore.
The Central Board of Direct Taxes is a statutory authority functioning under the Central Board of Revenue Act,1963.The officials of the Board in their ex-officio capacity also function as a Division of the Ministry dealing with matters relating to levy and collection of direct taxes.