In a move that will help more start-ups avail tax exemption, the government on Thursday tweaked their definition and relaxed ‘angel tax’ norms.
An entity will now be treated as a start-up for 10 years (from the date of incorporation) if its turnover is under Rs 100 crore. Earlier, the cap was seven years and Rs 25 crore, respectively.
The start-up tag helps new firms claim tax exemption and avail incentives.
From now on, angel funding up to Rs 25 crore will not attract any tax. Besides, all investments by listed companies with a net worth of Rs 100 crore or turnover of Rs 250 crore will be tax exempt.
Commerce minister Suresh Prabhu said investments by non-resident Indians would also be exempt beyond the limit of Rs 25 crore.
The new decisions are expected to reduce instances of tax dispute that arise due to lack of clarity over the definition of start-ups.
To avail tax exemption, eligible start-ups have to file a self-declaration with the Department for Promotion of Industry and Internal Trade. The DPIIT will pass on these to the tax department.
Currently, start-up funding by angel investors is subject to taxation if the valuation of the company is found to be in excess of its fair market value. The excess realisation will be treated as income and taxed at 30 per cent.......Read more
Source web page: New indian express
Such taxation, dubbed as angel tax, has remained a vexed issue with many start-ups accusing the tax department of high-handedness and scaring away angel investors.