Startups.. starting up high at Income Tax exemptions..!

New Delhi, February 20: The Department for Promotion of Industry and Internal Trade (DPIIT) on Wednesday issued a notification making prime changes to the existing set up of the Start-up industry in collaboration with the CBDT. Revising the definitions of the ‘startups’ to get the Income Tax exemption in the investments, an entity is now entitled to be a start up up to 10 years from its incorporation.

 

 

The committee of five members worked together to resolve the issues arising of the angel taxation. This is after the government tightened norms that came into effect on February 1, prohibiting marketplaces from selling products of affiliates and stipulating that such entities cannot exercise ownership or control over inventory.

According to the statement issued, there is no requirement now of making any application and there will be no case-to-case examination of Startups for exemption under the Income Tax Act. The valuation of shares is no more a criterion for exemption of investments

Investments made or to be made by all investors including family and friends into startups shall be exempt up to a limit of Rs 25 crore here onwards. “Investments into Startups by listed companies with a net worth of Rs 100 crores or turnover of Rs 250 Crore whose shares are frequently traded shall also be exempt under Income Tax Act beyond the limit of Rs 25 crore”, read the statement.

However, a Startup shall be eligible for exemption if it is a private limited company recognized by DPIIT and is not investing in assets specified in the notification. For being eligible for exemption under Section 56(2)(viib), a Startup should not be investing in immovable property, transport vehicles above Rs10 Lakh, loans & advances, capital contribution to other entities and some other assets, except in the ordinary course of its business.

Startups only have to file a self-declaration with DPIIT regarding not investing in specified assets for exemption. DPIIT then shall transmit these declarations to CBDT which will make necessary entries in their systems so that such startups are not picked up for scrutiny.