Start-up tax concession norms tweaked by government

NEW DELHI: In an attempt to make it easier for start-ups to attract investments, the Centre on Thursday allowed start-ups to avail tax concession only if total investment including funding from angel investors does not exceed Rs 10 crore.

According to a notification issued by the Commerce and Industry Ministry, an angel investor picking up stakes in a startup should have a minimum net worth of Rs 2 crore or should have an average returned income of over Rs 25 lakh in the preceding three financial years. 

The new amendment comes in the wake of concerns raised by start-ups over the ‘non-friendly’ angel tax provision that falls under the ambit of Section 56 of the Income Tax Act, which provides for taxation of funds received by an entity. 

The amendments are introduced to address key demands of startups with regard to exemptions under the I-T Act, said the statement issued by the Ministry. 

The Centre has also come out with another notification on the definition of startups which says that an entity shall be considered as a start-up up to a period of seven years from the date of incorporation/registration in India.

In the case of start-ups in the biotechnology sector, the period shall be up to ten years from the date of its incorporation/ registration, it added. The notification also said that the turnover of the entity for any of the financial year since incorporation/ registration should not exceed Rs 25 crore.