Handle Grievances Of Startups With Utmost Care, Tax Department Tells Officers
The circular stipulates strict timelines for the taxman to address grievances of startups.
The Income Tax Department has advised its officers to handle issues relating to startups in a time-bound manner and with “utmost care”.
The tax department, in a circular addressed to regional heads, notified strict timelines for taking a preliminary action and submission of a “final action taken report” against a grievance filed by a startup.
This comes after the government in August directed the establishment of a dedicated cell to address the concerns faced by startups. The cell is headed by a member from the Central Board of Direct Taxes.
The circular is one of the many steps taken by the government to create a favorable ecosystem for startups who have been grappling with issues like angel tax.
What The Circular Says
The circular stipulates strict timelines for officers to address grievances of startups. As per the circular, an officer must submit a “preliminary action taken report” within one day of calling of the report by the tax department.
An officer under a commissioner or director of the tax department must submit a “final action taken report” within three working days of calling of the report by the office, the circular states.
“The timeline stipulated in the circular is more than reasonable, as the officer has denied the benefit and everything is on the record, the officer must ideally not take more than one day to respond,” TP Ostwal, managing partner at chartered accountancy firm TP Ostwal and Associates, told BloombergQuint.
The fact that the government is concerned with the matter and has sensitised every commissioner shows the urgency in this matter, he said.
Experts told BloombergQuint that although the timelines look aggressive, the tax department would have to comply with the timelines considering the nature of issues faced by startups.
The stringent timelines send out a perfect signal to the business world that the government is serious about changes in tax administration as also in bringing in ease of doing business. By and large, as almost everything in the tax department is data driven, it won’t be an impossible task for the department to stick to such a deadline. However, the only challenge from the perspective of the officers is that they are severely short-staffed.Ameet Patel, Partner at Manohar Chowdhry & Associates
Apart from the dedicated startup cell set up in the tax department, the circular recommends officers to set up a cell at the local level. The circular also increases accountability of tax officers by stating that a commissioner or director would remain accountable towards the actions taken by officers under their charge for handling grievances submitted to them.
The government has been consciously taking steps to make it easier for the startups to do business in India. Exemption to registered startups from deemed gift tax and setting up grievance cell will help towards this end. The timelines for submitting Action Taken Report do look aggressive but sends out the key message that the government is serious about addressing their concerns.Shefali Goradia, Partner, Deloitte India
“While it is quite an appreciative step towards tackling startup woes, the timeline of three days to submit final action taken report seems to be quite aggressive,” Sandeep Jhunjhunwala, director at Nangia Advisors, told BloombergQuint. “However, it must be ensured that the stringent timelines don’t result in unwarranted deficiencies in the manner in which issues are dealt with.”