India is still a month away from getting a new government as the general election is still underway. But the current government seems to be determined to fulfill its promises to exempt Angel Tax for startups.
In the latest move, the income tax (IT) department has sent out all clearance certificates to startups, who have applied for Angel Tax exemption.
About 277 startups out 302, who applied for exemption, have got these certificates, according to an ET report. Rest of the 25 startups, who are found to have some discrepancies, will have to reapply again, added the report.
Many startups also confirm the development of receiving notifications from IT department to Entrackr.
The development comes a month after DPIIT had issued a notification in this regard.
In February, the DPIIT had issued a notification stating that registered start-ups would be exempt from the angel tax if they met certain conditions.
Last month, the government had sent a formal e-mail confirming the exemption of Angel Tax for startups, who have applied. About 92 had got the acknowledgment letter from CBDT in March.
The CBDT mail to a startup, which had applied for exemption, said that the provisions of clause (viib) of subsection 2 of Section 56 of the Income-tax Act,1961 (‘Act’) shall not apply to it.
Startups were issued notices under two income tax sections — 56(2)(viib), which deals with valuations (classification of funding as income or investment), and Section 68, which is about unexplained credit.
Many startups majorly raised concern over 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.
The govt, in February, revised the current definition of startups and angel tax. The Minister for Commerce and Industry (MCI) Suresh Prabhu said an entity shall be considered a startup up to 10 years from its date of incorporation instead of the existing period of 7 years.
For any entity to be considered startups, its turnover for any of the financial years since its incorporation should not exceed Rs 100 crore instead of the existing Rs 25 crore.
Besides, the ruling party, in its manifesto, has also promised to address the startups issues through dedicated departments.