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
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.