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Startup

Government relaxes angel tax norms, widens age cap of startups to 10 years

Updated : February 19, 2019 01:20 PM IST

The development comes after the government appointed a small working group consisting of angel investors and startup founders earlier this month to look into issues faced by angel investors.

Currently, startups avail tax concession only if total investment, including funding from angel investors, does not exceed Rs 10 crore.

Now a firm can be a startup even if its turnover for any of the financial years since its incorporation hasn’t exceeded Rs 100 crore.

In a major relief to startups, the government on Tuesday expanded the turnover criteria and widened age cap of startups from 7 to 10 years.

The development, first reported by CNBC-TV18 on Monday, comes after the government appointed a small working group consisting of angel investors and startup founders earlier this month to look into issues faced by angel investors.

Currently, startups avail tax concession only if total investment, including funding from angel investors, does not exceed Rs 10 crore. Now a firm can be a startup even if its turnover for any of the financial years since its incorporation hasn’t exceeded Rs 100 crore.

The angel tax, a 30 percent tax levied on investments made by external investors in startups, had made life difficult for an entrepreneur with many receiving income tax notices in 2018.

The notification by the Department for Promotion of Industry and Internal Trade or DPIIT, stated that the exemptions on the investments will come under section 56(2)(viib) of Income Tax Act, 1961.

An entity shall be considered a Startup if its turnover for any of the financial years since its incorporation/registration hasn’t exceeded Rs 100 Crore instead of existing INR 25 Crore. #Startup #AngelTax

— Suresh Prabhu (@sureshpprabhu) February 19, 2019

The government has also widened the definition of a start-up, announcing that an entity shall be considered a start-up for up to 10 years from its date of incorporation/registration instead of the existing period of seven years.

Definition of #Startups has been widened. An entity shall be considered a Startup upto 10 years from its date of incorporation/registration instead of the existing period of 7 years.#AngelTax @DIPPGOI

— Suresh Prabhu (@sureshpprabhu) February 19, 2019

The investments into eligible startups by listed companies with a net worth of Rs 100 crore or turnover of Rs 250 crore are also exempted under the same section.

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