Ven­ture Cap­i­tal Body Sub­mits its An­gel Tax Pro­posal to Govt

Lobby’s sug­ges­tions in­clude ex­emp­tion to all reg­is­tered star­tups which have raised to­tal non-pro­moter cap­i­tal of up to 10 crore

The Economic Times - - Disruption: Startups & Tech - Our Bureau

Bengaluru: The In­dian Pri­vate Eq­uity & Ven­ture Cap­i­tal As­so­ci­a­tion (IVCA) has sub­mit­ted a three­step pro­posal to the Cen­tral Board of Di­rect Taxes (CBDT) and the Depart­ment of In­dus­trial Pol­icy and Pro­mo­tion (DIPP) last week to re­solve the an­gel tax is­sue which has emerged as a huge road­block for many In­dian star­tups.

The sug­ges­tions, drafted around the ‘anti-abuse’ pro­vi­sions in the in­come-tax law, in­clude ex­emp­tion to all reg­is­tered star­tups which have raised to­tal non­pro­moter cap­i­tal of up to .₹ 10 crore. The pro­posal has also added that HNI in­vest­ments, if made along with an ex­empted in­vestor or a ver­i­fied fund such as Al­ter­na­tive In­vest­ment Fund 1 (AIF-I) ven­ture cap­i­tal fund, should also be ex­cused from such no­tices.

Se­condly, the pro­posal has sug­gested that reg­is­tered star­tups which have the per­ma­nent ac­count num­ber (PAN) of all its share­hold­ers, should also be ex­empted.

Thirdly, ac­cord­ing to Gopal Srini­vasan, for­mer chair­man, IVCA: “The no­tices which have been sent should be fast tracked in or­der to re­solve the mat­ter at the ear­li­est. We also said that these star­tups should not be asked to sub­mit 20% de­posit of the preap­peal as the law sug­gests in other cases.”

He said that the tax, which was mainly in­tro­duced to curb money-laun­der­ing

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in the coun­try, should not limit in­vest­ments or re­strict the growth of star­tups.

He added that the pro­posal does not re­quire any change of the law which be­comes a ten­u­ous process; rather, it is only ask­ing to make pro­vi­sions un­der­stand­ing the lim­i­ta­tions of star­tups. Srini­vasan said that the in­dus­try should tackle this mat­ter in a com­pre­hen­sive fash­ion.

ET had ear­lier re­ported that sev­eral startup founders across the coun­try said that they have re­ceived tax no­tices for fund­ing raised over the past few years, with the tax amount reach­ing up to 30% of the fund raise.

Startup founders had ear­lier said that they have been get­ting these tax no­tices and cases con­tinue to linger on, turn­ing it into a costly af­fair with charges for char­tered ac­coun­tants rang­ing from .₹ 5,000 to .₹ 20,000 for each rep­re­sen­ta­tion.

The move was widely crit­i­cised by en­trepreneurs and ex­perts.

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