In the days following the Department for Promotion of Industry and Internal Trade (DPIIT) notification to grant relief to startups under Section 56 (2) (viib) of the Income Tax Act 1961 earlier this week, the Central Board of Direct Tax (CBDT) is now ready to do its share to provide relief to the startups which have been affected by these notices.
Sachin Taparia, CEO, LocalCircles told Inc42 that the CBDT had asked LocalCircles to share the details of the startups who have received the demand orders. These details include PAN, the name of the company and section under which they have received the order.
The submission, which is to be done on Monday, includes nearly 150 startups as of now, but may go over to over 300 startups, which, Taparia expects, have received the demand notices from the Income Tax commissioners.
The CBDT is seeking details ahead of the formal notification that is expected to announce in the next few days. The agency will issue the details to its assessing officers explaining the mechanism for providing the exemption to startups from angel tax, under Section 56 of the Income Tax Act.
Also, in a joint submission made by think-tank iSPIRT and LocalCircles, they have recommended the CBDT to provide relief to startups from Section 68 of the I-T Act (which relates to source of investment in a firm) by removing the requirement for startups to submit bank statements, I-T returns and financial statements of their investors.
Inc42 had noted in its analysis of the notification that the issues that the notification has failed to address, included:
- Startups who received assessment orders will still have to fight the battle, old way
- Section 68 is yet to be addressed
- The certification process for the tax exemption under Section 80-IAC has been left unaddressed
The recommendations follow the same lines to bring relief to the startups already under the scan.
CBDT chief Akhilesh Ranjan had earlier said at the time of the notification by DPIIT that the startups which have received assessment notices, they will be not forced for scrutiny, while, those who have been issued demand orders, will have to follow through the appeal.
And in the cases like TravelKhana and others which have already paid a part of their taxes, they can only receive back their funds after they win the appeal, which shouldn’t be tough considering the exemption.