702 Startups Exempted From Angel Tax By CBDT: Piyush Goyal Tells Parliament

702 Startups Exempted From Angel Tax By CBDT: Piyush Goyal Tells Parliament

SUMMARY

DPIIT had received 944 applications for angel tax exemption

39 applications were incomplete

DPIIT had issued angel tax exemption under Section 56 (2) (vii) in February

In a major boost to the angel funding for Indian startups, the Central Board of Direct Taxes has exempted 702 startups under Section 56 (2) (vii) of Income Tax Act, 1961. The minister of commerce and industry Piyush Goyal informed the parliament that these startups had been exempted till June 21.

He said that, as of June 21, Department for Promotion of Industry and Internal Trade (DPIIT) had received 944 applications for angel tax exemption. Of this:

  • 39 have been found to be incomplete
  • 203 applications were repeat or modified applications
  • CBDT has exempted 702 startups under this provision

The development comes in lieu of the notice issued by DPIIT on February 19, 2019. The notice said: “All the startups are allowed to receive angel tax exemption regardless of their share premium values given that the aggregate amount of paid-up share capital and share premium of the startup after issue or proposed issue of shares, if any, does not exceed, INR 25 Cr.”

It is to be noted that prior to this update, section 56 (2) (vii)(b) of the Income Tax Act said that if a privately held company issues its shares at a price more than its fair market value, the amount received in excess of the fair market value will be taxed as income from other sources.

Due to this provision, in November 2018, the Ministry of Consumer Affairs (MCA) issued notices to more than 2,000 startups that had raised money since 2013. The notices were mostly sent to the startups whose valuations had fallen after the first round of fundraising.

At the time, 70 startups and iSPIRT foundation reached out to the Prime Minister saying that startups require significant capital early on and that raising equity funding via angel investors is the only option for them, which can only be raised at a premium for various reasons.

After much protests and discussions, the CBDT and DPIIT had issued the February notification. At the time of notification, it was also widely discussed that a few pain points for startups remain the same: Section 68 was yet to be addressed and the certification process for the tax exemption under Section 80-IAC had been left unaddressed.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.

You have reached your limit of free stories
Become An Inc42 Plus Member

Become a Startup Insider in 2024 with Inc42 Plus. Join our exclusive community of 10,000+ founders, investors & operators and stay ahead in India’s startup & business economy.

2 YEAR PLAN
₹19999
₹7999
₹333/Month
UNLOCK 60% OFF
Cancel Anytime
1 YEAR PLAN
₹9999
₹4999
₹416/Month
UNLOCK 50% OFF
Cancel Anytime
Already A Member?
Discover Startups & Business Models

Unleash your potential by exploring unlimited articles, trackers, and playbooks. Identify the hottest startup deals, supercharge your innovation projects, and stay updated with expert curation.

702 Startups Exempted From Angel Tax By CBDT: Piyush Goyal Tells Parliament-Inc42 Media
How-To’s on Starting & Scaling Up

Empower yourself with comprehensive playbooks, expert analysis, and invaluable insights. Learn to validate ideas, acquire customers, secure funding, and navigate the journey to startup success.

702 Startups Exempted From Angel Tax By CBDT: Piyush Goyal Tells Parliament-Inc42 Media
Identify Trends & New Markets

Access 75+ in-depth reports on frontier industries. Gain exclusive market intelligence, understand market landscapes, and decode emerging trends to make informed decisions.

702 Startups Exempted From Angel Tax By CBDT: Piyush Goyal Tells Parliament-Inc42 Media
Track & Decode the Investment Landscape

Stay ahead with startup and funding trackers. Analyse investment strategies, profile successful investors, and keep track of upcoming funds, accelerators, and more.

702 Startups Exempted From Angel Tax By CBDT: Piyush Goyal Tells Parliament-Inc42 Media
702 Startups Exempted From Angel Tax By CBDT: Piyush Goyal Tells Parliament-Inc42 Media
You’re in Good company