Employees work in front of computer monitors at a startup office. (Photographer: Dhiraj Singh/Bloomberg)

Angel Tax On Startups: IIT, IIM Experts To Study Issue, Make Suggestions

The government will set up a panel of experts from Indian Institutes of Technology and Indian Institutes of Management to examine taxation issues faced by startups in the country.

The decision, according to a statement by Central Board of Direct Taxes, was taken at a meeting held by Revenue Secretary Ajay Bhushan Pandey, Department of Industrial Policy and Promotion Secretary Ramesh Abhishek and CBDT Chairman Sushil Chandra. The committee, the statement said, will make suggestions for recognition of startups under the “Start Up India” programme and premium paid by investors while investing in such companies.

The CBDT said the committee will make recommendations on individual cases of recognised startups to the DIPP on issues pertaining to tax exemptions for such ventures.

The move comes after the Income Tax Department issued notices to over 150 startups over the last few weeks asking them to clear taxes on their angel funding, which in some cases were nearly 40 percent of the fundraise. Members of angel networks expressed fears that this could kill the startup ecosystem. Industry leaders and startup founders—including Mahindra Group Chairman Anand Mahindra and Snapdeal Co-Founder Kunal Bahl—railed against the tax on Twitter yesterday.

Also read: Kafka Devises Renewed Tax Terror for India's Startup Angels

Union Minister Suresh Prabhu tweeted later in the day that the Commerce and Industry Ministry “has taken up the issue of angel tax”.

The 2012 budget speech prefaced the introduction of angel tax to curb the laundering of black money through private limited companies.