A government-recognised start-up is eligible for exemption from the provisions of an Income Tax rule commonly referred to as angel tax, said Anurag Jain, secretary in the Department of Promotion of Industry and Internal Trade (DPIIT), on Thursday.
Companies recognised as startups by DPIIT are eligible for tax benefits and easier compliance. Government data showed that there are more than 84,000 DPIIT-recognised start-ups in the country.
“The section 56 (2) (viib) used to have two proviso. One was preferential treatment of foreign players. The preferential treatment has done away with. But there’s no change for start-ups. Any start-ups that are recognised by DPIIT will not attract angel tax if investment is made into them (by foreign or domestic investors),” said Jain during a post-budget interaction with reporters.
Finance Bill 2023 has proposed to extend the ambit of angel tax to include taxes on capital raised by non-resident investors now. The provision is expected to hurt foreign investments in startups.
Jain said the Budget’s announcement that PAN will be the common identifier for all digital systems of specified government agencies will help ease of doing business. A system of ‘Unified Filing Process’ will be set-up, ending the need for separate submission of the same information. All this will be done on the government’s national single-window system.
“This will help us in creating common returns (including GST and income tax). There will be a unified filing process, with the help of a single business ID. That’s a process that has to be developed. Our timeline for that is March 2024–that the returns related to the government of India are on the single screen,” Jain said.