Govt. Redefines Startup, Angel Tax Can Be Reduced

Govt. Redefines Startup, Angel Tax Can Be Reduced

- in Startups, Tech
@Ajay Rana

Government of India has redefined once again the definition of a startup.

This has been done to encourage entrepreneurship and to facilitate access to government for small and medium enterprises. Benefits

In addition, Govt. He has also hinted that the draconian Angel Tax in the new companies that receive their first financing can be reduced.

Here are 9 things you should know:

Age of Startup: according to the notifications issued by the Department of Promotion of Industry and Internal Commerce, a new business would be considered a start up to 10 years from the date of registration. Previously, the period was 7 years, and before that, 5 years.
Startup Value: from your registration, if a company has not exceeded the total billing of Rs 100 crore, it will be considered a start. Previously, this limit was Rs 25 crore. Therefore, the new rules to define a startup will now cover more startups, which will benefit more entrepreneurs.
Tax Rebate: Now, the juicy part. According to the new rules, a start would be eligible to obtain a tax refund under Section 56 of the Income Tax Law, if:

  • (Real estate investment) The company has not invested in any land or property other than its own office / factory
  • (Loans) The company has not received any Loan or advance, apart from any loan or advance used for commercial operations.
  • (Vehicle) The company has not purchased any motor vehicle, plane, yacht or any other means of transport whose cost exceeds Rs 10 lakh, except any transport vehicle used for commercial operations.
  • (Jewelry) The company has not invested in any jewelry, apart from what is required for commercial operations
  • (Exemptions) Rs 25 crore ceiling to define a start will still remain true for some exceptions, such as: Non-resident Indians; Alternative investment funds: category I registered in SEBI; In the event that the shares of any company with a net value of Rs 100 million or a turnover of Rs 250 crore are negotiated in the SEBI (Substantial Acquisition of Shares and Acquisitions) Regulations, 2011.
  • Angel Tax will be reduced: the Department of Promotion of Industry and Internal Commerce (DPIIT) and the CBDT officials met and discussed the problems raised by the new companies when it comes to Angel Tax. According to reports, a Working Group was formed, consisting of members of the Private Equity and Venture Capital Association (IVCA), Indian Angel Network, iSPIRT and LocalCircles, as well as DPIIT and the Tax Department. Civil Aviation, Suresh Prabhu has informed that very soon a new notification will be issued regarding the Angel Tax. It is expected that the Working Group will meet and decide how much reduction in the Angel tax can be granted to boost the initial funds in India. The steps will be taken in accordance with section 56 (2) (viib) of the Income Tax Act of 1961. At this time, 30.9% of Angel taxes are charged to the new companies (startup) that collect their first Angel funds.

Information Sources: ET, CNBCTVTIMES,

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