Union Minister of Commerce and Industry Suresh Prabhu on Tuesday announced that startups will now be exempted from “angel tax” on funds raised from investors in the last seven years. The Centre hopes this move will boost investments in startups.
Angel tax is the tax payable on capital raised by unlisted companies via issue of shares.
The minister also said that an entity will be considered a startup up to a period of 10 years from the date of incorporation and registration, instead of seven years as earlier. A company will also be considered a startup if its turnover for any of the financial years since incorporation and registration has not exceeded Rs 100 crore, instead of Rs 25 crore as earlier.
The Ministry of Commerce and Industry also said that the process for tax exemptions for startups will be simplified. Industry groups wrote to Prime Minister Narendra Modi in January alleging that many startups received income tax notices to pay a penalty, apart from 30% tax on funds they had raised over the last seven years, The Indian Express reported on Tuesday.
“The latest notification will solve 90% of the problems faced by startups in India,” Sachin Taparia, founder of online citizen engagement platform LocalCircles, told the daily. He said the move will benefit 16,000 firms employing around 3 lakh people, Taparia said. He added that the new rules will recognise another 10,000 companies set up between 2009 and 2011 as startups.