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

The government has eased the procedure for seeking income tax exemption by startups on investments from angel funds and prescribed a 45-day deadline for a decision on such applications, official sources said.

The move comes against the backdrop of various startup founders claiming that they have received 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. Entrepreneurs have raised concerns over these tax notices.

"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.

The new procedure says that 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 ..