Startup with up to 10 crore investments to get tax concession – DIPP’s new policy on Startup
12th, April 2018 - Startup Event
The new rule from DIPP is a big relief to the budding start-ups and investors. The government on Thursday allowed start-ups to avail tax concession only if total investment including funding from angel investors does not exceed Rs 10 crore.
As per the new rule, DIPP accredited Angel investor’s position. Report say an angel investor picking up stakes in a Startup should have a minimum net worth of Rs 2 crore or should have an average returned income of over Rs 25 lakh in the preceding three financial years.
"With the introduction of amendments through this notification, startups are likely to have an easy access to funding which in turn will ensure ease in starting of new businesses, promoting startup ecosystem, encouraging entrepreneurship, leading to more job creation," the ministry said in a statement.
This section provides that where a closely held company issues its shares at a price more than its fair market value, the amount received in excess of the fair market value will be charged to tax the company as income from other sources.
Startups also enjoy income tax benefit for three out of seven consecutive assessment years.
To avail the concessions, startups would have to approach an eight-member inter-ministerial board of certification.
"Department of Industrial Policy and Promotion (DIPP) has issued gazette notification...constituting a broad based inter-ministerial board to consider applications of startups for claim of following incentives of the I-T Act 1961," it added.
A startup set up as a private limited company or limited liability partnership incorporated after April 1, 2016, would be eligible for tax concessions.
Startups in the recent past have flagged their grievances to the government regarding angel tax provision, which they considered was not friendly to them.
An angel investor is the one who funds a startup when it is taking baby steps to establish itself in the competitive market.
Normally about 500-600 startups get angel funding in an year.
The government has extended tax benefits to just 88 startups out of 8,765 that have been recognised by DIPP since January 2016.
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