The government has eased the process for startups to seek income tax exemption on investments made by angel investors.
The DIPP recognises an entity as a startup up to a period of seven years from the date of incorporation, if its turnover for any of the financial years since incorporation has not exceeded Rs 25 crore.
To seek tax exemption, a startup will make an application to the DIPP, which will move it to the Central Board of Direct Taxes with necessary documents.
Startups will have to provide account details and income returns for the last three years, while investors will have to submit their net worth details and returns for the year investment has been made.
The CBDT has been mandated to approve or decline the exemption to the startup within 45 days of receiving the application.
Startups which have been issued tax assessment orders for the previous years by the taxman will not be eligible to apply for the exemption for that financial year, said Amit Maheshwari, partner at Ashok Maheshwary & Associates LLP.
The earlier requirement of a startup to submit report from merchant banker specifying the fair market value of shares has been done away with. The application form, however, seeks justification for valuation of shares.
Approval of inter-ministerial board of certification is no longer required, news agency PTI reported. Procedure for startups has been simplified by making application to the CBDT through DIPP, the report said.
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