Govt eases process for startups to seek tax exemption on angel fund investments

The government has eased the procedure for startups to seek income tax exemption on investments from angel funds as part of efforts to address concerns of budding entrepreneurs, official sources said.

Various startup founders have recently claimed of receiving notices under Section 56(2) (viib) of the Income Tax Act from the I-T department to pay taxes on angel funds raised by them.

"Commerce and Industry Minister Suresh Prabhu has approved a notification pertaining to this clause to make allowances for angel investors. A formal notification to this effect would be issued soon by the DIPP," sources said.

To seek the exemption, a startup will apply, with all the documents, to the department of industrial policy and promotion (DIPP). The application of the recognised startup shall be moved by the department to the Central Board of Direct Taxes (CBDT) with necessary documents.

"CBDT has been mandated to grant exemption approval to the startup for the purposes of this clause or they can ..