DPIIT-certified startups likely to be exempted from angel tax

NEW DELHI: The government is considering giving complete exemption to startups from angel tax once they are certified by the Commerce and Industry Ministry, a move aimed at helping budding entrepreneurs, official sources said. The consideration assumes significance as several startups have claimed to receive angel tax notices, impacting their businesses. Various startups have raised concerns on notices sent to them under the Section 56 of Income Tax Act to pay taxes on angel funds received by them. Officials of the department for promotion of industry and internal trade (DPIIT) and Central Board of Direct Taxes (CBDT) are holding series of meetings to address the angel tax issue, the sources said. "One of the consideration being though about actively is to give complete exemption to startups from Section 56(2)(viib) of the Income Tax Act, once they are certified by the DPIIT," they added.

This move may be gelled with capping the investment to a much higher level of angel funds so that a good number of startups do not face the taxmen.