Government has liberalized norms for startups, including the angel tax exemption.the latest changes will support startups to claim exemption from this tax even for past investments, including to startups incorporated before April 2016, the cut-off date for incentive under the startup policy announced by the government .
Angel tax, introduced in 2012, is levied on the difference between the amount received by a closely held company in lieu of its shares and the fair market value of the shares. The excess amount is taxed as income from other sources.
Since the launch of the Startup India Action Plan on January 16, 2016, 15,113 startups have been recognized under the programme across 492 districts in 29 states and six Union Territories.
As per the governments new initiatives to promote startups and entrepreneurs resulted in angel tax relaxaions and thereby reducing the burden of other incomes category tax to minimal amounts. Levy of this tax on a number of startups had rattled the sector, creating pressure on the government to announce relief.