Government relaxes Angel Tax norms, reforms definition of a startup

Key Highlights

Indian government encouraging the young minds to be entrepreneurs.

Any startup shall be treated as a startup for up to 10 years from the date of registration instead of the existing 7 years.

Revenue generation limit has been extended to 100 Crore instead of existing 25 Crore for an entity to be called as a startup.

The 21st era is an amorphous zone of the internet. Day by day we are witnessing innovative startups with a passion to do something unique and bring revolution in the current market. Investors are also backing such passionate entrepreneurs by raising high fund. In the same move, the Government of India has also taken certain steps to relax startups from Angel Tax by reforming its norms.  

According to the statement of Suresh Prabhu, Commerce Minister said, any startup shall be treated as startup up to 10 years from the date of registration or incorporation instead of the existing time period of seven years. 

Prabhu took these steps after having a round table on February 4 under the chairmanship of DPIIT attended by a host of startups, other stakeholders and angel investors to discuss the new measures on the contentious angel tax issue.

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The proposal is focused to simplify the method of exemptions for Startups under section 56 (2) (viib) of the Income Tax Act. According to new norms of Angel Tax, “An entity shall not be considered as a startup if its revenue generation is more than Rs. 100 Crore overtaking the existing amount from Rs. 25 Crores. The deliberation of shares received by eligible startups for shares proposed to be issued by all investors shall be exempted up to a sum limit of Rs 25 crore.” The minister also said that all funds into eligible Startups by Non-Residents, Alternate Investment Funds – Category I registered with SEBI shall also be exempted under Section 56(2) (viib) of Income Tax Act beyond the limit of Rs 25 crores.

Related : Government plans to shorten the registration process of the company to 3 days

Co-Founder, Indian Angel Network (IAN) & Founding Partner, IAN Fund, Padmaja Ruparel, “It is a revolutionary step by Government to promote startups in India. This action will put off handcuffs angle investing and will bring new startups into action thus leading to the creation of New India. The government has opened hands to startups to generate revenues and explore their businesses globally and assist India in becoming a startup hub of the globe. This is a seminal move for angel investing and the foundation of Startup 2.0.”

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