Department of Industrial Policy and Promotion may waive off angel tax soon

Startups witnessed their hopes dashed last week as they didn’t find any mention of angel tax in the finance minister’s budget speech.

In its current form, funds from angels are taxed at over 30 per cent if it is more than the fair market value (FMV). The clause was introduced in 2012.

It, however, appears that the demand of startups has reached the government, as the Department of Industrial Policy and Promotion (DIPP) has decided to waive off angel tax of up to Rs 10 crore for startups incorporated before 2016, according to Economic Times.

Startups incorporated after 2016 and recognised under the Startup India policy are not eligible for this tax.

Many startups recently complained about getting notices from IT department post raising angel investment.

Last month, startups had filed a petition through Change.org against angel tax demanded by the income tax department. The petition was filed by Sreejith Moolayil, co-founder of food brand, True Elements.

Moolayil took Twitter to mention that how the income tax department wants his company to pay Rs 40 lakh as tax for Rs 1 crore angel round it raised back in 2015.

Last year, various startups received assessment notices from the authorities asking them to pay mind-boggling tax on funds they raised.

In the past, many entrepreneurs including erstwhile Infosys board member and prominent angel investor Mohandas Pai had voiced his concerns over exorbitant taxation levied on angel funding.

Experts observed that the number of notices and assessment orders from the tax department contradict the spirit of startup India movement as they are becoming an impediment for ease of doing business in India.