CBDT Proposes Exemptions from Angel Tax for Startups
Relief for Unlisted Companies
The Central Board of Direct Taxes (CBDT) has proposed exemptions from the Angel Tax for certain categories of unlisted companies. This move is expected to provide much-needed relief to startups and promote investment in the sector.
Finance Bill Proposal
The Finance Bill 2023 includes a proposal to amend Section 562 VII B of the Income Tax Act. This amendment would exempt certain types of startups from the Angel Tax.
Angel Tax Background
Angel Tax, also known as Section 56 2 VII B of the Income Tax Act, taxes funds raised by startups if they exceed their fair market value. This has been a significant deterrent to investments in early-stage startups.
Exemption Categories
The proposed exemptions would apply to startups that meet certain criteria, such as having a turnover of less than ₹250 crores and obtaining certification from the Department for Promotion of Industry and Internal Trade (DPIIT).
Conclusion
The CBDT's proposal to exempt startups from the Angel Tax is a welcome move that will boost the growth of the startup ecosystem in India. By removing this barrier to investment, startups will have greater access to funding and be able to scale up their operations, contributing to economic development and job creation.
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