Angel tax: 8,204 start-ups have received exemption till date, shows govt data

As start-ups work to navigate the new norms under angel tax, data sourced from the government reveals that just 8,204 start-ups have been given exemption from angel tax from inception till date.   

In all, there are 1,14,902 start-ups registered with the Department for Promotion of Industry and Internal Trade and 10,939 start-ups have applied for exemption from angel tax till now. The data was provided in response to a query filed by Business Today under the Right to Information Act.   

Under the Startup India Action Plan, start-ups that meet the definition based on prescribed criteria can apply for recognition by the DPIIT. Start-ups that are incorporated as a private limited company or registered as a partnership of limited liability partnership with turnover less than Rs 100 crore in any of the previous fiscal are eligible to apply.     

Other eligibility criteria include that an entity shall be considered as a startup up to 10 years from the date of its incorporation and it should be working towards innovation/ improvement of existing products, services and processes and should have the potential to generate employment/ create wealth. An entity formed by splitting up or reconstruction of an existing business shall not be considered a startup, as per the norms.    

Post getting recognition, a start-up may apply for angel tax exemption provided that their aggregate amount of paid-up share capital and share premium post the proposed share issue is not over Rs 25 crore.    

Angel tax at the rate of 30.6 per cent is levied when an unlisted company issues shares to an investor at a value higher than its fair market value. While the provision was earlier only for resident investors, the Union Budget 2023-24 has extended the provisions of angel tax to non-resident investors as well.    

However, the CBDT had in October this year said in a communiqué to field officers that DPIIT recognized start-ups are exempt from the provision. In case they are picked up for scrutiny under under CASS (Computer-Assisted Scrutiny Selection), no verification has to be done and contentions of recognsied start-ups will be accepted.