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‘There Is No Tax Called Angel Tax,’ Interim FM Questions The Opposition

‘There Is No Tax Called Angel Tax,’ Interim FM Questions The Opposition

Only bogus companies and not genuine startups will face the wrath of angel tax, says interim FM

182 startups funded under Fund of Funds for startups (FFS) as of February 7

A total 15,798 startups have been recognised so far

At a time, when the Department of Promotion for Industry and Internal Trade (DPIIT, previously DIPP) under the leadership of commerce and industry minister Suresh Prabhu is trying hard to assure  startups and angel investors that the government is fully committed to iron out issues caused by taxes on angel investments, interim finance minister Piyush Goyal stated,

“The government is taking strong measures that bogus companies can’t evade taxes and genuine startups won’t have to bear the brunt of the taxes imposed on share premiums.”

Piyush Goyal was responding to the angel tax-related queries raised in the parliament on February 11.

In a rather rhetorical response to the angel tax exemption queries, Goyal said, “The opposition has also asked about angel tax exemption. Unfortunately, they are not aware of the truth that there is no tax called angel tax.”

“The truth is that the Congress regime saw the mushrooming of shell companies. These bogus companies used to sell shares at premium prices and when we have acted against them, the opposition is feeling the wrath.”

Interestingly, among the parliamentarians who raised the angel tax query in Lok Sabha are AIADMK MP G. Hari and BJP MP Bharat Singh.

The MPs had asked:

  • Whether the government has simplified the process for startups mobilizing funds through angel investors/seeking exemption from angel tax notices by eliminating the need for certification from an inter-ministerial body;
  • if so, the details thereof;
  • Whether the move seeks to ease the concern raised by startups about tax officials questioning the share premium received at the time of raising capital through the sale of new shares;
  • If so, the details thereof; and
  • Whether the exemption is likely to benefit the private and recognised startup companies and if so, the details thereof?

It is worth noting that in the last one week, two startups — Travelkhana and AddoDoc Technologies — told Inc42 that the CBDT deducted INR 33 Lakhs and INR 72 Lakhs from their accounts on February 5 and February 6 respectively.

Meanwhile, the DPIIT secretary Ramesh Abhishek, today informed that the department is working on a simplified framework for angel investments. “Some concrete ideas have emerged on way forward and soon we hope to come out with a better solution,” he said.

After the uproar created by the startups and investors in the last couple of weeks, on February 4th, officials from the DPIIT and the CBDT held a roundtable meeting with the various startup-related organisations — the Indian Private Equity and Venture Capital Association (IVCA), Indian Angel Network, iSPIRT, and LocalCircles. During the meeting, it was decided to form a small Working Group to assess the issue.

The Working Group members include Rajat Tandon, president of the IVCA, Alok Mittal founder-Indifi Technologies, Nakul Saxena of iSPIRT, Siddarth Pai of 3one4 Capital, Arpit Agarwal Principal, Blume Ventures and India Angel Network’s cofounders Padmaja Ruparel and Saurabh Srivastava.

Multiple members of the Working Group who attended February 8’s meeting at DPIIT office confirmed that the demands raised by the startup stakeholders have been accepted and the DPIIT and CBDT will now issue two separate notifications on Monday or later this week.

Startup India: Update

Responding to startup India-related queries, minister of state in the ministry of commerce and industry CR Chaudhary stated that as on February 7, 2019, a total 15,798 startups have been recognised.

The other updates are:

  • Fund of Funds For Startups: 182 startups funded under FFS
  • Learning & development module: Over 2,30,000 registrations achieved
  • Startup India Hub:  1,23,000+ queries have been handled by the Startup India Hub. 2,90,000+ registrations have been achieved on the Hub as of February 2019.
  • Mentorship: 660+ Startups have been mentored for incubation and funding support
  • Legal Support and Fast-tracking Patent Examination at Lower Costs:  427 facilitators for Patent and Design and 670 facilitators for Trademark applications have been empanelled to assist Startups in the filing of patents and trademarks. 801 applications have received a rebate of up to 80% on patent fees and have also received legal assistance.

Maharashtra Leads The Race

According to the statewise list (as on January 27, 2019), it’s the Maharashtra which leads the race and not Karnataka. While Karnataka has DPIIT-recognised 2261 startups, Maharashtra has 2973 startups, Delhi (2094), Uttar Pradesh (1294) and Telangana share the third, fourth and fifth position respectively.

Surprisingly, 9 states / UTs — Nagaland (7), Andaman and Nicobar Islands (4) Arunachal Pradesh (4) Tripura (4) Dadra and Nagar Haveli (3) Daman and Diu (2) Meghalaya (2) Mizoram (2) Sikkim (1) — have the number of startups in single digit.

Share Value Of The Startups Funded Under FFS

Earlier on December 28, 2018, on the details of all the startups funded under fund of funds for startups (FFS) with decline in share value post first round of funding, PP Chaudhary, minister of state for law and justice had said that out of 176 startups covered under FFS, there are around 9 startups with a decline in share value post first round of funding.

Clarifying the valuation method controversy, Chaudhary also informed that no specific parameters to predict the valuation of startups in the country have been put in place by the DPIIT.

The corpus of FFS which is INR 10,000 Cr is planned to be released over two Finance Commission cycles, that is, by the year 2025.

While INR 500 Cr was released to SIDBI in FY16 and INR 100 Cr in FY 17,  the total commitments under FFS stand at INR 1,750.70 Cr. The 35 Alternative Investment Funds (AIFs) have drawdown INR 279.98 Cr and 182 startups have received funding under FFS with a catalysed investment of INR 1004.82 Cr.

Author

Suprita Anupam

Inc42 Staff

An Electronics Engineer turned Business Journalist | Blogger | Avid Reader. Previously associated with Network18, Clean India Journal and Mudra Communications, he has been writing on a variety of issues that include cryptocurrency, policy-related matters, blockchain, investments-destination, technology and other startup-related matters.

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