Govt mulls retrospective relief for certified start-ups: Angle TAX

The government is considering a proposal to grant some relief to certified start-ups from the so-called angel tax, with retrospective effect, if they have received funds within a certain limit, a senior government official said on Thursday

The government is considering a proposal to grant some relief to certified start-ups from the so-called angel tax, with retrospective effect, if they have received funds within a certain limit, a senior government official said on Thursday. The revenue department of the finance ministry and the department of Industrial Policy and Promotion (DIPP) will soon decide on the cap, he added. This means recognised start-ups that were incorporated even before April 2016 could also get relief. Analysts said this move will address concerns of over 300 start-ups that received funding from angel investors. As such, start-ups that were incorporated after April 2016 are already exempted from this tax if they are recognised under the Startup India policy of the DIPP. The tax is applicable on the capital raised by unlisted firms in excess of the fair market value of their shares. The official said most of the angel funding for start-ups is in the range of just Rs 3-4 crore. The idea behind this relief is that an investor who is already investing in a risky venture shouldn’t be taxed. Ex-finance minister Pranab Mukherjee had introduced this tax in 2012 to check laundering of money through high premiums on shares. Analysts have said the taxmen treat this excess amount as “income from other sources” and seek to tax it under section 56 (II) of the Income Tax Act.  The idea was to avoid the misuse of this route for converting black money into white.