New Delhi, April 5, 2018

The Centre is discussing a proposal for retrospective exemption of ‘angel tax’, or tax on capital raised by unlisted companies for investments in start-ups.

The exemption may be given with certain limits on the investments made and be restricted to the start-ups certified by the inter-ministerial board (IMB).

“The Department of Industrial Policy & Promotion (DIPP) is in discussion with the Finance Ministry on the matter of retrospective exemption of angel tax for recognised start-ups. The idea is not to tax risky investments. We are hopeful of arriving at a decision by the month-end,” a government official told BusinessLine.

The need to make the changes arose when around 18 notices were issued to start-ups by the Income Tax Department related to angel tax. This happened despite the fact that start-ups recognised as innovative by the IMB are exempted from angle tax.

“Although many of the start-ups that were given notices were certified as innovative by the IMB, they faced harassment due to lack of clarity in the rules. We plan to change that,” the official said.

Since only start-ups that were registered in 2016 are extended taxation benefits, those that raised investment before 2016, when the Act changed, and up to 2016, when they registered, face harassment from tax officials despite the fact that they have got the IMB’s approval.

The official said the IMB for start-ups may also be revamped. So far, it has certified 88 start-ups for tax exemptions.

[The Hindu Business Line]