Startups face 200% fine for non-compliance with govt norms on angel tax

Further, angel tax exemptions were extended to investments from only VC funds in case of category-I alternative funds

In a move to encourage only genuine start-ups, a penalty of 200 per cent has been introduced for not complying with the government’s conditions while availing angel tax exemption. 

The penalty pertaining to under-reporting of income — introduced through an amendment to the Finance Bill passed by the Lok Sabha on Thursday — is aimed at deterring the misuse of angel tax exemption, allowed in the Budget for FY20.

The Bill will now go to the Rajya Sabha, which cannot make changes to it. 

Conditions laid down by the Department of Promotion of Industry and Internal Trade (DPIIT) in February