Startups to be listed for Angel tax exemption

2 min read

1.The government on Friday agreed to compile a list of startups eligible for angel tax exemption, based on their audited financial statements and income tax returns of the previous year.
2.The government has decided to raise the maximum time limit below which a firm would be deemed eligible for angle tax exemption from present 7 years to 10 years.Earlier, startup’s whose aggregate amount of paid up share capital does not exceed ₹10 crore were eligible for exemption from angel tax.Now the officials have agreed to raise the limit to ₹25crore.
3.Over past few weeks, several startup’s have reportedly been receiving notices from the I.T department asking them to clear taxes on angel funding they raised.In some cases they were levied a penalty for not paying Angel tax.

4.Angel Tax was introduced in 2012.It is a 30% tax that is levied on the funding received by startups from an external investor.However, this 30% tax is levied when startups receive angel funding at a valuation higher than its ‘fair market value’.
5.Angel tax is problematic because there is no definitive or objective way to measure the ‘fair market value’ of a startup.Investors pay a premium for the idea and the business potential at the angel funding stage.However, tax officials seem to be assessing the value of the startups based on their net asset value at one point.