Centre begins damage control on Angel tax

The Centre has begun damage control exercise on the dreaded Angel tax issues haunting start-ups and first signs may appear in interim Finance Minister Piyush Goyal's Budget, which is set to announce tax rebate for a certain category of them.

A case is being built within the government that neither the finance minister nor Prime Minister's Office were taken into confidence before the income tax department started serving fresh notices to certain early-stage entrepreneurs seeking some documents for scrutiny which irked them and prompted many to even leave the country.

“The government will tighten the noose around the tax department for acting in a haste,” official sources told DH, adding the autonomy given to the IT department may have been used beyond the limit.

Angel investors have received multiple notices for details on their source of income, bank account statements, PAN numbers and other financial data which is usually provided to assessment officers for scrutiny. Last year, a sizeable number of start-ups had also been asked to pay Angel tax.

The government has now eased certain norms for start-ups and according to the new rules they can directly apply for the tax exemption through the Department of Industrial Policy and Promotion (DIPP). The Central Board of Direct Taxes (CBDT) will then review the application within 45 days.

The Centre has also made it easier for start-ups to claim tax exemptions on funding from angel investors. However, complaints have been received even on the 45-day norm.

Sources said that Goyal is expected to extend the existing tax rebate for start-ups by another two years.

Those in the field of agriculture and exports sectors may expected a special fund of above Rs 100 crore being created for them in the interim budget, they said.