Relief for startups: those with orders get exempted from angel tax
Startups that had orders and had applied for an exemption with the Central Board of Direct Taxes (CBDT), received a formal mail from the Department for Promotion of Industry and Internal Trade (DPIIT) that they are exempted from Angel Tax.
After what seems like several long and hard months, startups finally got relief from the dreaded Angel Tax. According to a few startup founders, startups that had orders and had applied for tax exemption with the Central Board of Direct Taxes (CBDT), have now received a formal mail from the Department for Promotion of Industry and Internal Trade (DPIIT), earlier known as Department for Industrial Policy and Promotion (DIPP), under the Ministry of Commerce, that they are exempted from Angel Tax.
The email shared by a startup founder with YourStory read:
With regard to your declaration dated 01/03/2019, furnished in Form 2 in pursuance of para 5 of the notification no. G.S.R.127(E) dated February 19, 2019 of Department for Promotion of Industry and Internal Trade (‘DPIIT’), Ministry of Commerce and Industry read with notification no. S.O.1131 (E) dated 5th March 2019 of Central Board Of Direct Taxes, it is stated that the provisions of clause (viib) of sub section 2 of Section 56 of the Income-tax Act,1961 (‘Act’) shall not apply to (name of the applicant company) XYZ PAN XYZ DPIIT Recognition number XYZ on the amounts received as consideration for issue of shares subject to the fulfilment of conditions as specified in the notification no. G.S.R.127(E) dated 19th February 2019 of DPIIT and subsequent amendments if any.
After several incidents where the CBDT had used coercive measures, and cases of Travel Khanna came to light, it directed its officials not to take any coercive action against firms who have already received notices. It had also asked them to expedite all cases where startups have filed appeals, on a priority basis.
In a written communication sent to Chief Commissioners of Income Tax (CCIT) in various zones, the CBDT had said, “I am directed to request you to kindly instruct the concerned authorities in your zone to identify cases pertaining to them and to ensure that no coercive action is taken in these cases. I am further directed to request you to kindly ensure that appeals pending in these cases, if any, are disposed of on priority.”
It all started after the government passed a fresh directive where it exempted startups from the ambit of Angel Tax up to a certain limit along with other reform measures and these come with retrospective effect.
Speaking to YourStory on the condition of anonymity, a startup founder said, "This new email should help us focus on our business and actually deal with an issue that has been bothering us for over a year now."