Government widens start-up definition, enhances angel tax exemption limit

India on Tuesday revised the definition of start-ups, while also enhancing the limit of angel tax exemption.

Easing the rules of doing business for start-ups, Commerce Minister Suresh Prabhu announced on Twitter, "Definition of #Startups has been widened. An entity shall be considered a start-up up to 10 years from its date of incorporation instead of the existing period of 7 years.

"An entity shall be considered a start-up if its turnover for any of the financial years since its incorporation/registration hasn't exceeded Rs 100 crore instead of existing Rs 25 crore," he added.

The Minister further tweeted, "Considerations of shares received by eligible start-ups for shares issued or proposed to be issued by all investors shall be exempt up to an aggregate limit of Rs 25 crore."

"All investments into eligible start-ups by non-residents, alternate Investment Funds- Category I registered with market regulator Sebi shall also be exempt under Section 56 (2) of the Income Tax Act beyond the limit of Rs 25 crore," Prabhu said in another tweet.

Under Section 56 of the I-T Act, companies, including small start-ups, are liable to pay taxes on money invested as capital.

Angel investors - individuals who inject capital in a start-up in exchange for ownership stake - have been demanding scrapping of the angel tax - tax levied on their investments - and the government had constituted a working group earlier this month to look into it.

--IANS

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