Angel Tax: Blessing or Curse

 

Angel Tax: Blessing or Curse

Angel Tax is known as direct Tax. Which is imposed on Startup Company or Newly establish of Company. Start-ups mean born from entrepreneurial dreams.

• Either firm is registered under the Company Act 2013 or Partnership Act 1932 or Limited Liability Partnership Act 2008
• The firm should not exceed 10 years of operation after it’s registration.
• After registration of the firm, the revenue should not exceed 100 crores.

In the recent few decades government also supports these ventures as these start-ups generate lots of employment opportunities.

These investors are known as Angel investors. Angel investors are those individuals who have enough wealth to invest in their own capacity or through crowdfunding platforms to bring the capital for the start-ups and the investments by Angel investors are regulated by SEBI.

ANGEL TAX: 

Angel Tax is a direct tax refer to the income tax payable on capital raised by the start-up firms via the issue of shares where the share price is seen higher of the fair market value of the shares sold. It has come in force 2012.

Applicability:

This Angel tax is not imposed on non-resident or venture capital funds, actually, it is applicable only on the investments made by the resident investors.

Criteria for Angel Investor :

1. As angel investors' net worth should be 10 times greater than his investment. 
2. Previously as per notification by the Department for Promotion of Industry and Internal Trade, an angel investor picking up stakes should have minimum net worth of INR 2 crore and should have average return income not less than 50 lakh in last 3 years now to give some relaxation government announced an entrepreneur raises INR 5 lakhs from an investor, the amount will be taxed unless the relatives had the income of INR 50 lakhs per annum or net worth of Rs 2 crores.

REVIEW & RESTRUCTURE :

Start-ups generate employment, it helps in technical advancement and helps in many other ways which actually helps to build a strong economy structure and it can not be overlooked.

The age limit of start-ups increased to 10years which will surely help the start-ups a lot. And as we discussed earlier the revenue limit was 25 crores to be certified as a start-up but now the limit issue is almost axed as the limit increased to 100 crores. This restructures give breath to the start-ups for sure

CONCLUSION :

In the end, it can be said that this relaxation given by the government is enough to encourage the start-ups and the angel investors, it will help to prevent money laundering without interrupting the operation of start-ups. But in the end, time will tell the effects of newly restructured angel tax and we all know nothing is permanent, in future angel tax may go through some more amendments for betterment.