Angel tax: 672 startups given exemption by CBDT, says DPIIT secretary Ramesh Abhishek

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Updated: June 23, 2019 5:42:26 PM

672 startups have been given exemption with respect to investments under section 56(2)(viib) of the Income-tax act 1961 aka angel tax by the Central Board of Direct Taxes (CBDT) so far.

Income tax e-filings, Income Tax Department, GST filing data, PSE borrowings, indirect tax revenuesThe controversial tax was introduced by the then Finance Minister Pranab Mukherjee in the 2012-13 budget to check money laundering.

672 startups have been given exemption with respect to investments under section 56(2)(viib) of the Income-tax act 1961 aka angel tax by the Central Board of Direct Taxes (CBDT) so far.

“672 Startups have been given a formal exemption letter by CBDT for the first time,” Department for Promotion of Industry and Internal Trade (DPIIT) tweeted citing its secretary Ramesh Abhishek.

The number of startups being granted exemption stood at 541 till May 27, according to a tweet by Ramesh Abhishek last month. Till April 10, the number stood at 291 startups up from 135 startups that were notified of exemption till March 29, a source with direct knowledge of CBDT’s notification to startups had told Financial Express Online earlier.

The controversial tax was introduced by the then Finance Minister Pranab Mukherjee in the 2012-13 budget to check money laundering to be levied on startups that have capital in exchange of equity shares at a price over and above the fair valuation of the shares sold even as the premium has to be being paid by investors considered as income and hence has been called as angel tax as the amount taxed is usually on angel investment in startups.

The department in its Vision 2024 document in April this year had proposed to exempt investments by alternative investment funds from angel tax, cut rates for the GST, launch regulatory sandbox for development of fintech products, tax exemption for ESOPs, and tax incentives for startup investments to reduce the compliance burden among startups.

Launched in January 2016, the Startup India programme has so far registered more than 19,000 startups even as simplifying regulations for startups is the key challenge and the government is working on it, DPIIT tweeted Ramesh Abhishek as saying.

Recently during the joint address to the Parliament, President Kovind has also stressed on the significance of India’s growing startup ecosystem. “Today India has joined the league of countries with the most number of start-ups in the world,” Kovind had said. India had around 7,700 technology startups ahead of the US and the UK, as per Nasscom-Zinnov Startup Ecosystem report last year.

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