Angel Tax: After govt push, IVCA to find number of startups troubled by notices

To bring more clarity on the number of startups troubled by Angel Tax notices, the group of investors-led Indian Private Equity and Venture Capital Association (IVCA) has started a process to zeroed down on them.

IVCA had recently met with the finance ministry, where it was asked to find out the issue that is troubling startups majorly in India.

The association found that there is a lack of clarity on the number of startups getting angel tax notices.

According to the president of the IVCA, Rajat Tandon, there have been several sources quoting different numbers around the Angel Tax-related issue.

The association has now teamed up with social media platform LocalCircles to ascertain data related to startups and Angel Tax through a survey. The survey will primarily find out the number of startups that have received notices under two income tax sections - 56(2)(viib) and Section 68, which deals with unexplained credit, outlines ET report.

Earlier, over 60 startups complained about Angel Tax and demanded a corrective measure to be taken in this regard from the govt. The major concern was raised on Section 56 of the Income Tax Act, which says if a closely held company issues its shares at a price more than its fair market value.

The amount received in excess of the fair market value will be charged as income from other sources.

Angel investment is early stage fund that helps startup stand on its feet to fight competition and survive in the market. Currently, startups are levied around 30 per cent Angel Tax on investments made by external investors.

Besides, IVCA along with CBDT had appealed to the govt to exempt Rs 10 crore to all registered startups.

Commerce Minister Suresh Prabhu had assured startups to come up with a solution on Angel Tax. The Department of Industrial Policy and Promotion (DIPP) last week had called for a round-table meet on February 4.

The govt has invited about 50 people from startups, investors, industry bodies such as IVCA and iSPIRT and Income-Tax department to discuss concerns on tax exemption.

(Update: The article has been updated with Indian Private Equity and Venture Capital Association in place of Indian Venture Capital Association )