The tax department on Saturday exempted angel investors from income tax on their investments in startups with effect from April 11.
The tax concessions are subject to certain conditions laid down by the Department of Industrial Policy and Promotion last month, which said that the share capital and share premium of the startup should not exceed Rs 10 crore after such investments.
Also the angel investor who plans to subscribe the shares in the start-up will have to fulfil prescribed criteria and the start-up will have to procure a report from a merchant banker, specifying the fair market value of the shares in accordance with income tax rules.
The Income Tax Department, on May 24, issued a notification, superseding its June 2016 notification.
"...The Central Government, hereby notifies that the provisions of clause (viib) of sub-section (2) of section 56 of the said Act shall not apply to consideration received by a company for issue of shares that exceeds the face value of such shares, if the consideration has been received for issue of shares from an investor in accordance with the approval granted by the Inter-Ministerial Board of Certification," the Central Board of Direct Taxes (CBDT) said in the May 24 notification. This notification comes into effect retrospectively from April 11, 2018, it said. AGENCIES
The CBDT has also amended Rule 11 UA (2)(b) of I-T Act, thereby making merchant banker valuation compulsory for the purpose of determining fair market value of unquoted equity shares, and omitted the word 'accountant'.
Ready to Master Stock Valuation? ET’s Workshop is just around the corner!
Start a Conversation
Post comment