Startups had requested the government to re-look at the policy expressing dissatisfaction over the changed norms announced last month.
In a meeting with startups along with PE, VC body IVCA, Indian Angel Network and other members of the startup ecosystem, the government has formed a panel over the controversial angel tax and said that a solution will be arrived at in next 5 days, CNBC TV18 reported.
The discussion took place with the Department for Promotion of Industry and Internal Trade (DPIIT).
“Told DPIIT that angel tax isn’t just a financial problem…causes emotional stress to founders,” members said during the meeting.
On January 16, the government had eased the regulations to claim exemption as startups were now required to make an application via DIPP in a prescribed format along with the essential documents. Following which the Central Board of Direct Taxes (CBDT) would issue the exemption certificate within 45 days.
Moreover, the new rules said that startups need not seek fair market valuation certificate from merchant banker that was earlier mandated and consequently criticised by startups due to the high fees by merchant bankers instead of chartered accountants as barred by IT department last year.
However, startups had requested the government to re-look at the policy expressing dissatisfaction over the changed norms.
“Startup representatives will again sit with CBDT and DPIIT,” CNBC TV18 quoted meeting minutes. “First solution is to look for a definition of a startup.”
The biggest clamour has been around the mandatory income tax returns 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 relative, the amount will be taxed unless the relatives had the income of Rs 50 lakhs per annum or net worth of Rs 2 crores,” said serial entrepreneur and partner at venture-builder platform GrowthStory K Ganesh told FE Online earlier.
However, since the exemption only covers DIPP-registered startups, the startup community had looked at unregistered startups as well and those that are more than 7-year old (of the period as per the startup definition of businesses not older than 7 years).
“Majority part of the start-up ecosystem remains out of reach of the benefits available vide the notification,” said said Archana Khosla, founder partner at Mumbai-based law firm Vertices Partners.