New angel tax rules provide relief to eligible start-ups
- The Centre on notified new rules pertaining to angel tax which, will exempt registered start-ups of a specified size from the tax and any scrutiny to do with its applicability.
- Angel tax is applicable to unlisted companies that have raised capital through sale of shares at a value above their fair market value. This excess capital is treated as income and taxed accordingly. This tax predominantly affects start-ups and the angel investments they attract.
- According to New notification, investments of up to ₹25 crore in an eligible company will be exempt from the angel tax. In addition, investments made by a listed company of a networth of at least ₹100 crore or a turnover of at least ₹250 crore would also be exempt. Investments made by non-residents will also be exempt.
- The notification said that an eligible start-up would be one that is registered with the government, has been incorporated for less than 10 years, and has a turnover that has not exceeded ₹100 crore over that period.
- Once the signed declaration and documents are submitted to the DPIIT, the body will decide on the eligibility of the start-up and then communicate a list of eligible start-ups to the Central Board of Direct Taxes.
