Indemnity from Angel Tax for all start-ups ends all raging controversies

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The prologue of Angel Tax actualized in 2012 impacting start-ups & the funding they attract. The tax is mainly inflicted on the surplus share capital generated by unlisted firms that go beyond the fair market value of the shares. Investors & entrepreneurs showed their discontentment towards the Government with this tax being levied upon them. But the scenario has changed its course on February 8 (Friday) when the Central Board of Direct Taxes & the Department For Promotion of Industry and Internal Trade came to an agreement that will exempt the start-ups from the Angel Tax depending on the income tax returns & audited financial statements of the previous year.

Founder of LocalCircles (Start-ups Community), Sachin Taparia, requested for a complete angel tax exemption by presenting a submission to CBDT & DIIPT. The submission stated that full exemption to be offered from Section 56(2)(viib) to a particular share premium amount depending on the submission of all documents.

The new rules of the enhanced exemption threshold state that start-ups whose share premium does not go beyond the limit of 25 crores (the previous limit being Rs 10 crore) to receive immunity from taxation. The unlisted firms will have to provide a self-certified declaration stating that no misuse of angel funds will ever take place. On furnishing all documents, the DPIIT will have to offer its validation along with the submission of PAN & name of all the companies to CBDT. After this, recognized start-ups will not be receiving notice that comes under Section 56(2)(viib).

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Ramesh Abhishek, DPIIT secretary resolved to come to a conclusion from the Angel Tax issue on February 4th. As per the notifications that are soon to be announced by the Ministry of Commerce and Industry on February 11th, the Government will recognize unlisted companies as an entity integrated for a time span of 10 years along with a turnover not going beyond Rs 50 crore. Earlier it was 7 years along with a less than Rs 25 crore turnovers.

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A spokesperson of the conference that took its shape on February 8th, said that Rs 25 crore in capital surplus will be offered as a blanket exemption to DPIIT registered start-ups irrespective of the funding source. No questions will be raised by the CBDT.
With such uplifting & positive updates around the issue of Angel Tax, investors & budding entrepreneurs have finally won that will ultimately assist them to broaden their horizons.

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