Startups seek Angel tax relief to revive growth
According to industry estimate, Angel tax is one of the reasons behind the decline of the growth in early stage funding in the country, falling every quarter this year.
Angel tax or tax on capital raised by unlisted companies by issuing shares in excess of their 'fair market value' remains a contentious issue for startups more than 18 months after the government exempted 'innovative' firms from this tax, reports ET.
As per the report, the startups are hopeful that the government would resolve this issue in the upcoming budget or at the earliest possible.
According to industry estimate, Angel tax is one of the reasons behind the decline of the growth in early stage funding in the country, falling every quarter this year.
"We are in internal discussions on the matter," a government official told ET, adding, "However, nothing is expected to come out anytime soon."
As per Section 56(2)(viib) of the Income Tax Act, where a company receives any consideration from a resident for issue of shares exceeding the face value of such shares, then the aggregate consideration exceeding the fair market value of the shares will be taxed as 'income from other sources'. At present, the angel tax rate is 30%, reports ET.
Although government issued a notification amending Section 56(2)(viib) to exempt 'innovative' startups from the said tax, this only applies to startups certified by the department of industrial policy and promotion (DIPP) and comes with several riders.
"This was for only 2016. Therefore, companies that raised monies prior to 2016, when the Act changed, and up to 2016, when they registered, continue to be harassed by the I-T officials," TV Mohandas Pai, one of India's most active early-stage investors, told ET.
Currently, the angel tax is applicable to individual investors, while venture capital funds are exempted. However, angel investors are not recognised as venture capital funds.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Fundamental picks by brokerage: These 3 largecap, 2 midcap stocks can give up to 28% return - Check targets
SBI Senior Citizen Latest FD Rates: What senior citizens can get on Rs 7 lakh, Rs 14 lakh, and Rs 21 lakh investments in Amrit Vrishti, 1-, 3-, and 5-year fixed deposits
Tamil Nadu Weather Alert: Chennai may receive heavy rains; IMD issues yellow & orange alerts in these districts
SIP+SWP: Rs 10,000 monthly SIP for 20 years, Rs 25 lakh lump sum investment, then Rs 2.15 lakh monthly income for 25 years; see expert calculations
Top 7 Mutual Funds With Highest Returns in 10 Years: Rs 10 lakh investment in No 1 scheme has turned into Rs 79,46,160 in 10 years
SIP vs PPF: How much corpus you can build in 15 years by investing Rs 1.5 lakh per year? Understand through calculations
Retirement Planning: Investment Rs 20 lakh, retirement corpus goal Rs 3.40 crore; know how you can achieve it
11:29 AM IST