Angel tax row: Income Tax department gives a breather to start-ups

The Income Tax (I-T) Department has given an exemption to start-ups from angel tax even on earlier assessment orders, subject to certain riders. 

The I-T department and the Department for Promotion of Industry and Internal Trade (DPIIT) had earlier given exemption to start-ups from the much controversial tax on certain conditions. However, these exemptions were not available to these firms, if additional assessment was made prior to February 19 this year. 

Now, the Central Board of Direct Taxes (CBDT) extended exemptions to these assessment orders as well. 

Angel tax refers to the income tax payable on capital raised by unlisted firms by issuing shares, where the share price is considered in excess of the fair market value. 

Last week, CBDT had eased assessment norms for start-ups recognised by DPIIT. 

After protests by start-ups, the government had raised the threshold for availing angel tax exemption for these companies, besides widening their definition. 

Consideration of shares issued or proposed by start-ups has been hiked to Rs 25 crore from Rs 10 crore for availing exemption from the angel tax. Also, consideration received by eligible start-ups for shares issued or proposed to be issued to a listed company having a net worth of Rs 100 crore, or turnover of at least Rs 250 crore was also exempted. 

The definition of startups was also widened to include an entity up to 10 years from its date of incorporation instead of the existing period of seven years.