DPIIT Requests FinMin to Remove Angel Tax on Startups

The Department for Promotion of Industry and Internal Trade (DPIIT) has recommended the removal of the Angel Tax for startups. This tax, originally introduced in 2012 under Section 56 (2) (viib) of the Income Tax Act, aims to prevent abuse such as money laundering and round-tripping.

However, it has been a long-standing concern for startups and investors. When a closely held company (like a startup) issues shares at a valuation higher than the fair market value, tax authorities treat the excess amount received as income from other sources and levy a tax of about 30%. Investors argue that they invest at higher valuations considering a startup's future potential, and the tax notices hinder their "ease of doing business."

Venture capital investors also believe that repealing the Angel Tax will encourage Indian startups to relocate their domicile back to India and foster innovation in the world's third-largest startup economy. Let's hope for positive developments.

DPIIT's suggestion also comes after the Confederation of Indian Industry (CII) in its budget recommendations called for the removal of angel tax saying it “will greatly aid in capital formation”.

As of now, there isn't a specific timeline for the decision on repealing the Angel Tax. The recommendation to remove it has been made by the DPIIT, but the final decision rests with the Union Finance Ministry. We'll have to keep an eye out for update.

The potential benefits of repealing the Angel Tax for startups are manifold. Removal of the tax would create a more favorable environment for angel investors, encouraging them to invest in early-stage startups without the fear of tax scrutiny. As startups often rely on angel funding during their initial stages. Eliminating the tax burden would enhance their access to capital, fostering innovation and growth. A tax-free investment climate would attract foreign investors, leading to increased foreign direct investment (FDI) in the Indian startup ecosystem.

Moreover, vibrant startups contribute significantly to job creation. By easing investment, the country can witness more startups to scale up and hire talent.

In addition to these benefits, a tax-free regime would make Indian startups more competitive globally, encouraging them to stay and operate within the country. Simplifying tax regulations would improve the ease of doing business for startups, reducing administrative burdensm

These benefits depend on effective implementation and monitoring to prevent misuse. Let's hope for positive policy changes.

Post Budget: Amazon, Flipkart & Uber To Be Affected By New Increased Service Tax Rate

Finance Minister Arun Jaitley presented the Super Budget 2015 on 28^th February and got a thumbs up from most of the industry people. According to a proposal under the newly presented budget, the ecommerce industry will now come under the new service tax rate of fourteen percent. This new proposal is surely going to have a huge impact on web base aggregators of bus operators, retail sellers, hotels and taxi owners like OlaCabs, Amazon, Snapdeal, Flipkart and Uber.

According to the new proposal, which became effective from March 1, all online aggregators that own and operate a web based application will now come under the tax net.

Related - Budget 2015: All Talks, No Work For Tech-Startups, Reacts Tech Industry

"All aggregators which by means of an application and a communication device, enable a potential customer to connect with persons providing service of a particular kind under the brand name or trade name; shall fall under the service tax bracket," said a notification issued by the Finance ministry's department of Revenue, effecting the amendments to the Service Tax Rules of 1994 introduced in the Union budget 2015 on Saturday.

“We applaud the government's decision to include specific language pertaining to aggregators in the 2015 Union Budget that will drive improvements to tax compliance,” said a statement given by an Uber spokesperson to the Economic Times.  This new proposal to include online commerce industry under the ambit of the new service tax can be seen as a result of intense discussions that have been taking place between Uber and the Indian Tax authorities over the last few months. The Tax authorities of India questioned Uber last year over the payment of service tax in the country.

Until recently, the service tax rules did not imply on the web based aggregators. According to Uber India, this new proposal will ensure that there is transparency in the flow of tax revenues directly to the Indian government.  On the other hand, OlaCabs is hopeful that such new rules will bring the foreign players and domestic players on a level playing field and give them equal chance to grow and flourish.

As per the new rules introduced in the Budget 2015, even if such web based aggregators employ just a country head or liaison, their officials will still be liable to pay service tax on the behalf of the company.

These new service tax rules will also be applicable to classifieds players, deal websites and online aggregators like Stayzilla, Quikr, Cashkaro, Zomato, Mydala, FoodPanda, Housing and Olx

Post Budget: Amazon, Flipkart & Uber To Be Affected By New Increased Service Tax Rate

Finance Minister Arun Jaitley presented the Super Budget 2015 on 28^th February and got a thumbs up from most of the industry people. According to a proposal under the newly presented budget, the ecommerce industry will now come under the new service tax rate of fourteen percent. This new proposal is surely going to have a huge impact on web base aggregators of bus operators, retail sellers, hotels and taxi owners like OlaCabs, Amazon, Snapdeal, Flipkart and Uber.

According to the new proposal, which became effective from March 1, all online aggregators that own and operate a web based application will now come under the tax net.

Related - Budget 2015: All Talks, No Work For Tech-Startups, Reacts Tech Industry

"All aggregators which by means of an application and a communication device, enable a potential customer to connect with persons providing service of a particular kind under the brand name or trade name; shall fall under the service tax bracket," said a notification issued by the Finance ministry's department of Revenue, effecting the amendments to the Service Tax Rules of 1994 introduced in the Union budget 2015 on Saturday.

“We applaud the government's decision to include specific language pertaining to aggregators in the 2015 Union Budget that will drive improvements to tax compliance,” said a statement given by an Uber spokesperson to the Economic Times.  This new proposal to include online commerce industry under the ambit of the new service tax can be seen as a result of intense discussions that have been taking place between Uber and the Indian Tax authorities over the last few months. The Tax authorities of India questioned Uber last year over the payment of service tax in the country.

Until recently, the service tax rules did not imply on the web based aggregators. According to Uber India, this new proposal will ensure that there is transparency in the flow of tax revenues directly to the Indian government.  On the other hand, OlaCabs is hopeful that such new rules will bring the foreign players and domestic players on a level playing field and give them equal chance to grow and flourish.

As per the new rules introduced in the Budget 2015, even if such web based aggregators employ just a country head or liaison, their officials will still be liable to pay service tax on the behalf of the company.

These new service tax rules will also be applicable to classifieds players, deal websites and online aggregators like Stayzilla, Quikr, Cashkaro, Zomato, Mydala, FoodPanda, Housing and Olx