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Home›Tax government›Angel tax: the government forms a panel to reduce the tax burden on startups, according to a solution in the next 5 days

Angel tax: the government forms a panel to reduce the tax burden on startups, according to a solution in the next 5 days

By Sarah S. Bryant
February 4, 2019
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The discussion on the angel tax took place with the Ministry for the Promotion of Industry and Internal Trade (DPIIT).

In a meeting with startups with PE, VC IVCA, Indian Angel Network and other members of the startup ecosystem, the government formed a panel on the controversial angel tax and said a solution would be found within the next 5 days, CNBC TV18 reported.

The discussion took place with the Directorate for the Promotion of Industry and Internal Trade (DPIIT).

“I told DPIIT that angel tax is not just a financial issue… causes emotional stress for founders,” members said at the meeting.

On January 16, the government relaxed the regulations to request an exemption, as startups were now required to apply through DIPP in a prescribed format with essential documents. After that, the Central Commission for Direct Taxes (CBDT) would issue the exemption certificate within 45 days.

Additionally, the new rules stipulated that startups did not need to apply for a fair market valuation certificate from the investment banker who had previously been commissioned and therefore criticized by startups due to high bankers’ fees. business instead of chartered accountants, as banned by IT last year.

However, the startups had asked the government to review the policy expressing their dissatisfaction with the changed standards.

“The startup representatives will sit again with CBDT and DPIIT,” CNBC TV18 said in the meeting report. “The first solution is to find a definition of a startup.

The biggest clamor has been around the mandatory income tax reporting requirement for an angel investor of at least Rs 50 lakh for the year preceding the investment year.

“If an entrepreneur raises Rs 5 lakhs from his parent, the amount will be taxed unless the parents have an income of Rs 50 lakhs per year or a net worth of Rs 2 crores,” said the serial entrepreneur and GrowthStory start-up platform partner K. Ganesh told FE Online earlier.

However, since the exemption only covers startups registered by the DIPP, the startup community also looked at unregistered startups and those over 7 years old (from the period according to the definition of startups to companies under age 7).

“The majority of the startup ecosystem remains beyond the reach of the benefits available after notification,” said Archana Khosla, founding partner of Mumbai-based law firm Vertices Partners.

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