DPIIT issues notification to revise exemptions for start-ups under Section 56(2)(viib)
Given its direct impact on availability of capital, taxation of start-ups on account of issuance of shares at a premium above the fair market value under Section 56(2)(viib) of the Income-tax Act, 1961 (“IT Act”) – also referred to as Angel Tax – has been an issue of concern for the start-up sector for some time now. To alleviate these concerns, the Department for Promotion of Industry and Internal Trade (“DPIIT”) has issued a Notification dated 19-02-2019 (“Notification”) in supersession of earlier notifications dated 11-04-2018 as modified by another notification dated 16-01-2019.
At its core, there are three key aspects of this Notification: definition of start-ups (as per DPIIT); eligibility for claiming deduction under Section 80-IAC of the IT Act; and exemption under Section 56(2)(viib) of the IT Act. A few important aspects pertaining to these are set out below:
Definition of start-up expanded
Th…
Given its direct impact on availability of capital, taxation of start-ups on account of issuance of shares at a premium above the fair market value under Section 56(2)(viib) of the Income-tax Act, 1961 (“IT Act”) – also referred to as Angel Tax – has been an issue of concern for the start-up sector for some time now. To alleviate these concerns, the Department for Promotion of Industry and Internal Trade (“DPIIT”) has issued a Notification dated 19-02-2019 (“Notification”) in supersession of earlier notifications dated 11-04-2018 as modified by another notification dated 16-01-2019.
At its core, there are three key aspects of this Notification: definition of start-ups (as per DPIIT); eligibility for claiming deduction under Section 80-IAC of the IT Act; and exemption under Section 56(2)(viib) of the IT Act. A few important aspects pertaining to these are set out below:
Definition of start-up expanded
Th…