Startups 2019-01-17

Easing The Process of Tax Redemption By Angel Investors To Boost Entrepreneurship

In A Bid To Promote The Startup Culture In The Country, Government Has Eased The Procedure Of Seeking Tax Redemption By Angel Investors

By Content Writer
Easing The Process of Tax Redemption By Angel Investors To Boost Entrepreneurship

There is a growing wave of entrepreneurship and startups in India. Prime Minister’s Narendra Modi’s “Start-up India” initiative was launched to build a strong ecosystem for nurturing innovation and entrepreneurship in the country.  To promote an environment of innovations, employability and entrepreneurship across the country, the government has rolled out many programs and schemes.

One of the most dreaded things for a start-up is the issue of angel tax. Startups have been raising the issue of Angel Tax for years, requesting the government to abolish it.

Now Start-up can have a sigh of relief, as the government has finally eased the procedure for seeking tax redemption on Angel Tax.

The Issue of Angel Tax

Angel tax was introduced with the aim of keeping money laundering in check.  Angel Tax is a 30% tax that is levied on the funding received by startups from an external investor. However, this 30% tax is levied when startups receive angel funding at a valuation higher than its ‘fair market value’ and it’s considered as an income.

However, the major problem troubling both startups and investors is that there is no objective way to measure the “fair market value” of a start-up. Investors pay a premium for the idea and the business potential at the angel funding stage. But, the tax officials seemed to be assessing the value of the startups based on their net asset value at one point.

How To Seek Angel-Tax Exemption

Under the new procedure, startups will have to apply to the Department of Industrial Policy and Promotion (DIPP) with all the necessary documents.

The application of the recognised start-up shall be moved by the department to the Central Board of Direct Taxes (CBDT) with necessary documents. The earlier requirement of start-up to submit the report from merchant banker specifying the fair market value of shares has also been removed. But now, application procedure has been simplified by making application to CBDT through DIPP.

Who Can Seek Angel-Tax Exemption

According to the revised procedure, Startups which are recognised by the DIPP would be eligible to seek exemptions.

Startups, whose aggregate amount of paid-up share capital and share premium does not exceed Rs 10 crore after the proposed issue of shares, are eligible for angel tax exemption 
In addition to this, It is also mandatory that the angel investors must have filed income tax returns of at least Rs 50 lakh for the year preceding the investment year.

star franchise india
Survase shubham bandu : 16, Feb 2019 at 10:57 PM
How to work
Related opportunities
  • Pharmacies
    Online Healthcare Company is one of the fastest-growing industries in..
    Locations looking for expansion Haryana
    Establishment year 2020
    Franchising Launch Date 2020
    Investment size Rs. 2lac - 5lac
    Space required 100
    Franchise Outlets -NA-
    Franchise Type Unit
    Headquater Gurgaon Haryana
  • Toy Shops
    About Us: Puppets, promoted by Funstar Kids Retail LLP, is a..
    Locations looking for expansion West bengal
    Establishment year 2018
    Franchising Launch Date 2019
    Investment size Rs. 20lac - 30lac
    Space required 500
    Franchise Outlets -NA-
    Franchise Type Unit
    Headquater kolkata West bengal
  • Quick Service Restaurants
    About Us: We are a startup company with a unique concept..
    Locations looking for expansion Maharashtra
    Establishment year 2019
    Franchising Launch Date 2019
    Investment size Rs. 50000 - 2lac
    Space required 035
    Franchise Outlets -NA-
    Franchise Type Unit, Multiunit
    Headquater Nashik Maharashtra
  • Established in 2000, in Faridabad (Haryana)Aaban Creations has been nourished by..
    Locations looking for expansion Haryana
    Establishment year 2010
    Franchising Launch Date 2019
    Investment size Rs. 10lac - 20lac
    Space required 250
    Franchise Outlets -NA-
    Franchise Type Unit
    Headquater Faridabad Haryana
Insta-Subscribe to
The Franchising World
For hassle free instant subscription, just give your number and email id and our customer care agent will get in touch with you
OR Click here to Subscribe Online
Daily Updates
Submit your email address to receive the latest updates on news & host of opportunities
More Stories

Free Advice - Ask Our Experts

ads ads ads ads