Central Board of Direct Taxes (CBDT) Chairman P C Mody on Saturday said as the concerns related to ‘angel tax’ have been “sorted out”, the country’s startup community should now not worry about taxmen and concentrate on their businesses.
Mody said that all “legacy issues” related to startups will be resolved through a consultative process and under a strict supervision of senior officers of the tax authority.
Startup industry to accomplish goals faster now
Easing of angel tax woes of startups will help the startup industry to accomplish the activities faster and will give a big relief to industry players. Section 56(2)(viib) of the I-T Act provides that the amount raised by a startup in excess of its fair market value would be deemed as income from other sources and taxed at 30 per cent. Touted as an anti-abuse measure, this section was introduced in 2012. It is dubbed as angel tax due to its impact on investments made by angel investors in startup ventures
In her maiden Budget speech on Friday, Union Finance Minister Nirmala Sitharaman proposed a number of measures to resolve the problems being faced by startups with regard to their initial funding, called angel tax, their certification and verification of investors. The CBDT boss said, “I am very happy to say that all issues which were there with the DIPP… we have had extensive deliberations between both the departments and we have resolved all issues related to startups.”
The Department of Industrial Policy and Promotion (DIPP) is now called DPIIT (Department for Promotion of Industry and Internal Trade DPIIT).
“The issues resolved are with regard to the definition of startups, with regard to the issue of valuation of shares and with regard to sources of funds,” Mody said.
The DPIIT, under the commerce and industry ministry, deals with foreign direct investment and issues related to startups. “Now, I think everything has been sorted out and there should not be any cause of concern for the startups,” Mody said.
“As the head of the tax family, I can definitely assure the startups that there would not be any occasion for them to agitate or have any misgivings. They can just concentrate on doing their business,” the Chairman said.
The Central Board of Direct Taxes is the policy-making body for the Income-Tax Department.
Asked what are the “administrative arrangements” that his department will make in this context, as announced by Sitharaman, Mody said this statement of the finance minister was in respect of “legacy issues”.
“Like in certain cases where scrutiny (of a startup) had already commenced or the notices were already issued, there we propose to have dedicated officers carrying out the scrutiny and that also would be done in consultation and prior approval of supervisory officers,” he said.
“So, when there is involvement of senior officers and there is more of a consultative process, I do not anticipate that there would be any issue left that would trouble or agitate startups,” the CBDT chief said.
Sitharaman has stated that it will be ensured that no inquiry or verification in such cases be carried out by the assessing officer without obtaining approval of the supervisory officer.
Several startups have been complaining and making representations to the government for about a year with regard to they receiving I-T notices. They claimed it was getting difficult for them to operate when the taxman was breathing down their neck.
— With PTI inputs