Startup Norms Revised – Angel Tax

February 19, 2019, the ministry of commerce and industry revised the taxation norms of start-ups.  This defining has come into the picture because of tax. Earlier, bases the taxation policy, rich individuals were stopped from laundering money via unlisted companies. But, the conflict began with the rising startups where investment by wealthy people could not be justified as the revenue and profit could not get them listed. So, what is a startup? As per the new norms,

  • An entity that is less than 10 years old
  • An organization that has revenue of less than Rs 100 crores
  • A company that generates employment or wealth, or works for development, production, as a service provider or innovator.

So, make startups receiving the exclusive funding, the Central government got “Angee tax” in the picture. Here, the Angel investment will not be taxable after the investment, the share premium of a startup is Rs 10 crore or below. Else, the investor must have a returned income of Rs 50 lakhs and a net worth of Rs 2 crore or more, for the year before investment.

Since the situation could be improved still, the government has come up with new norms, such as raising the ceiling to Rs 25 crore from Rs 10 crore.

Angel tax

The criteria to be fulfilled for Angel tax exemption

  • No capital contributed to other businesses
  • No investment made of more than Rs 10 lakh in aircraft, vehicles or yacht
  • No investment made in residential house or commercial property, excluding renting or business.

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