CBDT Exempts Startups from Angel Taxes on Share Premiums

A recent move ensures that genuine entrepreneurs will not be affected by the government’s tax provisions on share premium, considered as a part of income. That is, the government has exempted all the registered startups from paying taxes on the income received from selling shares under ‘angel tax’.

Angel tax is the income tax payable by startups on the capital raised via the issue of shares through off-market transactions. The tax is levied on the capital raised from the sale of shares by unlisted companies from an Indian investor if the price of issued shares exceeds the fair market value of the company.

Also Read: Failing to Comply With Angel Tax Rules May Lead to 200% Penalty

In this case, only the excess income is considered for taxation. Angel tax is not applicable if the investor is a non-resident or the investment is in the form of venture capital funds.

Before this move, the income tax department had exempted only the registered startups from paying angel tax. However, a few companies that had received tax demand notices were excluded from the same to provide them exemption at the appeals stage. Now, the exemption is made applicable to the companies that have received tax demand notice for the share premium as well.

Since the issue with angel tax is fixed, the companies can focus on areas such as cash flow management, capital raising, and growth.

You May Also Like

Taxation of dividend income received on or after 1 April 2020 (FY 2020-21)

You may receive a dividend from your equity or mutual fund investments.…

Know the taxation rules for income F&O trading

Futures and options are stock derivatives that are traded in the stock…

Important Cash Transaction Limits and Penalties Under Income Tax That You Need to Know About

In India, there are a lot of transactions that go unaccounted for,…
Gold Jewellery

24K Gold Rate in India for November 2019: Week 4

The fourth week began with the gold rate in India holding at…