To fast track the solution process for startups troubled by the Angel Tax, the Central Board of Direct Taxes (CBDT) has asked social media platform LocalCircles to furnish startups details, who have pending appeals or order under the draconian tax.
CBDT has aksed LocalCircles to collect details including names, PAN and income tax notices of startups on Friday in a meet.
During the meet, iSPIRT and LocalCircles also made a joint submission to the CBDT to provide relief to startups from Section 68 of the I-T Act (which relates to a source of investment in a firm) by removing the requirement for startups to submit bank statements, I-T returns and financial statements of their investors.
Due to the sensitive nature of the documents, many investors are reluctant to submit it to the startups, but are willing to directly submit it to the AO or CIT-Appeals if requested, said ET report quoting the suggestion submitted by iSPIRT and LocalCircles.
Several bodies and startups including the Indian Angel Network, iSPIRT Foundation, and Indian Private Equity and Venture Capital Association (IVCA) have earlier requested to the govt to do away with the Angel Tax. All pending appeals for Angel Tax against DPIIT-registered startups should be examined expeditiously and concluded before March 31.
In the next few days, CBDT is expected to issue a circular to its assessing officers explaining the mechanism for providing an exemption to startups from Angel Tax, under Section 56 of the Income Tax (I-T) Act.
On Feb 19, the DPIIT had increased the base exemption of share capital issued for startups to Rs 25 crore from Rs 10 crore earlier.
However, the notification did not provide much respite as many startups still find that the limit needs to be raised to Rs 50 crore. They also demand clarification on the contentious issue of section 68 of the Income Tax Act, which deals with unexplained fund receipts.