 "Angel investors want govt to clear roadblocks")
A delegation of start-up investors on Wednesday sought clarity on the 'angel tax', a single-window clearance, and ease of doing business, in a meeting with Ramesh Abhishek, secretary in the department of industrial policy and promotion (DIPP).
Around 40 investors spoke to the official on problems faced by start-ups.
"There is a lot the government has done under the start-up initiative, but we needed clarity on a few issues," said an angel investor who was part of the delegation.
The angel tax has been a contentious issue for investors and many claim there is no clarity on it even after the government scrapped it last month. A notification by the Central Board of Direct Taxes made the required changes to Section 56(2)(viib) of the Income Tax Act exempting startups raising funds from angel investors.
Funds raised by unlisted companies through equity are taxed on the amount raised in excess of the fair market value. This is taxed as "income from other sources" under Section 56(2) of the Income Tax Act and charged the corporate tax rate, resulting in an effective tax of over 30 per cent.
Experts said the valuation of start-ups was far in excess of their market value because it was based on the promise of an idea and not immediate worth.
"If we go by the notification, only startups that fulfill criteria set by the DIPP can avail of the exemption. Startups need a certificate from the inter-ministerial board, fulfilling criteria like not being more than five years old, turnover not exceeding Rs 25 crore, working towards innovation and commercialisation of new products or services, and driven by technology or intellectual property," an angel investor said. The delegation also discussed a way to certify angel groups so that investments made through them could be exempt from tax. The DIPP secretary asked the delegation to make recommendations in this regard.
