Finance minister has announced that angel tax will not be applicable on startups that are registered with the Department for Promotion of Industry and Internal Trade(DPIIT).
The move is likely to give a long-demanded angel tax relief to start-ups and exempt them from scrutiny.
The government has also decided to set up a dedicated cell under Central Board of direct taxes(CBDT) for addressing the problems faced by startups.
Angel Tax is a 30% tax that is levied on the funding received by startups from an Angel investor.However,this 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.
Further,the angel tax which was aimed at curbing money-laundering has resulted in a large number of genuine start-ups receiving notices from the tax department.