672 startups have been given exemption with respect to investments under section 56(2)(viib) of the Income-tax act 1961, or commonly known as angel tax, by the Central Board of Direct Taxes (CBDT) so far.
Secretary, DPIIT, Mr. @rabhishek1982 also said that simplifying regulations for startups is the key challenge and the Govt. is working on it. He stressed on the fact that 672 Startups have been given a formal exemption letter by CBDT for the first time. pic.twitter.com/rabkn7j8Jg
— DPIIT India (@DIPPGOI) June 20, 2019
Till the end of last month, 541 startups were granted exemption, said an another tweet by Ramesh Abhishek last month.
Introduced in finance budget of 2012-13, the controversial angel tax was established to curb money laundering via small startups, that have received equity infusion in excess of the fair valuation, with the premium being paid by investors as their income that have capital in exchange of equity shares at a price over and above the fair valuation of the shares sold even as the premium has to be being paid by investors considered as income and hence has been called as angel tax as the amount taxed is usually on angel investment in startups.
DPIIT is working on a definition of ‘accredited investors’, who could be provided tax incentives for investments in startups. The department has prepared a draft definition of these accredited investors, which can include trusts, individuals, family member of a startup and unlisted companies and these defined investors may get exemption from angel tax under Section 56(2)(viib) of Income Tax Act, 1961, beyond the Rs 25 crore limit.
In addition, as part of ‘Startup India Vision 2024’, DPIIT has also proposed relaxation in the income tax laws, for startup entrepreneurs or founders, pertaining sale of residential properties and carrying forward of losses, wherein capital gain on transfer of residential property not to be charged in certain cases.