In another move to clear the confusion among startups that have already received Angel Tax notices before the latest exemption notification on February 19, the Central Board of Direct Taxes (CBDT) has asked LocalCircles, a community social media network, to provide relevant details in terms of companies' names, PAN and the relevant section under which these companies have received the notices.
Speaking to YourStory, LocalCircles Chairman Sachin Taparia said, “We will make the submission to the CBDT on Monday and have also requested them to process the exemption certificate for startups in appeal process ahead of others."
The CBDT also sought information on the status of these Angel Tax cases, i.e. whether it was in the appeal stage or if it was holding the order.
Startups had welcomed the notification by Department for Promotion of Industry and Internal Trade (DPIIT), which provided them an exemption from the Angel Tax, but they were worried about the status of the past Income Tax notices.
It is now likely that the CBDT will come out with fresh instructions to the principal I-T commissioners and the Assessing Officers on how to provide exemptions to startups under the new regulations. Startups which raise share capital up to Rs 25 crore will no long come under the ambit of Angel Tax.
LocalCircles and iSPIRT have jointly submitted a letter to the CBDT seeking further steps from the Income Tax Department to set aside any doubts that the startups might have regarding the Angel Tax under the purview of Section 56 (2) (viib).
“In case the demand has been levied against Section 56 (2)(viib) of the Income Tax Act and the startup has furnished its Startup India exemption certificate, it should be deemed as satisfactory explanation under Section 56(2)(viib) as long as it is within the limits stated in the DPIIT notification,” the letter said.
Section 68 remains a cause for concern
However, Section 68, which deals with unexplained cash credits has become a point of concern for the startups as regulations stipulate that a startup should provide its investors' details, including sensitive information like bank statements, income-tax returns and financial statements.
The letter from LocalCircles and iSPIRT said, “In case the demand has been levied against Section 68 of the Income Tax Act and the startup has furnished the details of the investors together with the PAN of the investor along with its Startup India exemption certificate, it should be deemed as satisfactory explanation regarding the identity of the investor under Section 68.”
Also read: Angel Tax: what happens to startups who have already been issued notices?