Government widens the definition of start-ups and relaxes angel tax norms. An entity shall be considered a start-up up to 10 years from its date of incorporation.
This is against the existing period of 7 years. Also, an entity will be considered a start-up if its turnover in any financial year hasn't exceeded Rs 100 crore.
Currently an entity is a start-up if its turnover does not exceed Rs 25 crore.
On the tax exemption front, funding in start-ups by all investors will be exempted from 'Angel tax' (section 56) up to an aggregate limit of Rs 25 crore.
Investments by listed companies with net worth of Rs 100 crore or turnover of Rs 250 crore shall be exempt beyond the limit of Rs 25 crore.
Investments by non-residents, alternate investment funds (category i) shall be exempt beyond the limit of Rs 25 crore.
Currently funds from angels are subjected to over 30 percent tax if it is more than the Fair Market Value (FMV).
Clauses regarding FMV have been done away with; no questions can be raised by tax officers on valuation of start-ups.
The criteria for start-ups to be eligible for exemption include;-
It must be a private limited company recognised by Department for Promotion of Industry and Internal Trade (DPIIT).
It should not invest raised capital in specified asset classes like immovable property, transport vehicles above Rs 10 lakh, loans and advances.
Capital contribution to other entities and some other assets except in the ordinary course of its business.