Acknowledging the difficulties faced by startups with regards to Angel Tax, the commerce minister Suresh Prabhu has assured to come up with a solution soon.
Commerce Minister said that the ministry has consulted Finance Ministry in this regard and they are working together to find the best possible solution to Angel Tax.
The issue of Angel Tax was raised by startups, who got multiple income tax notices demanding taxation and explanation on their fundraising from angel investors.
Angel Investment is generally defined as early stage fund that helps startup stand on its feet to fight competition and survive in the market.
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.
Startups are levied around 30 per cent Angel tax on investments made by external investors. A fortnight ago, the govt said that it would constitute an expert panel on the matter and no coercive action against such startups will be taken until it resolves.
As per the latest report, the govt has withdrawn circular on the applicability of section 56(2)(viia) of the Income-tax Act, 1961.
Talking about other initiatives, Prabhu said the govt is also creating a baseline for ease of doing business (EODB) in states such as Maharashtra, Bihar, Uttar Pradesh, Andhra Pradesh, and Himachal Pradesh.
The ministry has adopted six districts in above-mentioned states. Until the ease of doing business is improved at the district-level, people will not get benefited, added Prabhu. The ministry has also been working to utilise the available resources in a particular district.
He has also asked Government e-Marketplace (GeM) authorities to support budding entrepreneurs in providing marketplace platform.
India’s ranking in regards to EODB has improved in the last two years. It jumped 53 notches to 77th place with 67 EODB score in the World Bank’s ease of doing business ranking.
Newzealand and Singapore topped the list with EODB score 87 and 85 respectively.