After having issued two notifications — a CBDT notification on December 24 and another by the Department of Industrial Policy and Promotion (DIPP) on January 16 — the Centre is now organising a roundtable meeting on angel tax exemption framework to incorporate the majority view.
To be organised by the DIPP, representatives from leading startup-related associations, India Private Equity and Venture Capital Association (IVCA), iSPIRT, NASSCOM, TiE, Indian Angel Network, and community media platform LocalCircles, are expected to participate in the roundtable.
In its January 16 notification, DIPP, while announcing amendments to the angel tax exemption norms, which earlier required an IMB approval, invited comments and feedback from everyone in order to tackle the issue.
The Department of Revenue, Ministry of Finance officials will also supposedly attend the roundtable to enter into a common ground and help release the final notification.
While all the above-mentioned associations have written multiple letters to the DIPP, recently around 70 startups along with iSPIRT and LocalCircles also wrote to the Prime Minister Narendra Modi requesting to look into the angel tax issue and resolve on priority.
Speaking to Inc42, Sachin Taparia, chairman, LocalCircles said, “For the last two days, I have been meeting with the DIPP officials. While Section 56(2)(viib) was added in the first place to discourage money laundering, in order to draw a fine line between the shell companies and genuine startups, we have demanded that all the startups that are Level 1 DIPP recognised should be immediately exempted from the purview of Section 56(2)(viib) upon the submission of the certain documents for two previous financial years.”
The five documents that Taparia mentioned in his submission are:
- Audited Financials
- All monthly payroll records including names and PANs of all employees
- Monthly expenses
- All TDS returns
- All GST Returns (If registered for GST)
Earlier, speaking to Inc42, 3One4 Capital founding partner Siddarth Pai said that the current restriction imposed on angel investors such as minimum income in the previous year should be INR 25 Lakhs ($35.15K) and not INR 50 Lakhs ($70.3K) as mentioned in the recent notification.
Similarly, keeping the Indian scenario in check, the minimum net worth of angel investors should be minimised to INR 1 Cr ($140.6K) from the existing INR 2 Cr ($281.2K).
After consulting the stakeholders, the DIPP is expected to release another notification on or before February 11. It remains to be seen if the CBDT also releases another notification clearing issues pertaining to discounted cash flow valuation method or not.