Angel Tax removed ? Is the Startup devil finished yet?

The government on Wednesday simplified the process for Startups seeking exemption from angel tax. In a bid to ensure the free flow of money and balance of the Indian startup ecosystem, the Center has announced that start-ups that have raised capital up to INR 25 crore can now ask for tax benefits, which was earlier INR 10 crore. Introducing the new waivers, nearly 5000 startups will get benefit claimed officials. 

• What’s the story?

Angel tax is a term used to refer to the income tax payable on capital raised by unlisted companies via issue of shares where the share price is seen in excess of the fair market value of the shares sold. The excess realization is treated as income and taxed accordingly. The tax was introduced in the 2012 Union Budget by then finance minister Pranab Mukherjee to arrest laundering of funds. It has come to be called angel tax since it largely impacts angel investments in startups. 

This attracted a lot of criticism from the Indian startup community as several startups were started receiving notices from the tax department. In a bid to encourage the ecosystem and considering the humongous growth potential of early stage startups the center has now revised its policy giving startups a certain relief. 

• What is next?

The new policy although largely appreciated by most , has still failed to finish the devil completely. There are almost 250-300 startups, that have already received tax notices and have to go through the appeal process since there is no particular solution given to them. With a all positive mindset on starting up and creating new jobs, let us know how you feel about this new norm in the comment section below.