13 February 2019
Government of India eases norms on start-ups by relaxing eligibility criteria and tax limits

The Central Government has given in to the increasing demands for revising the definition and scope of angel tax. An entity shall be considered a startup upto 10 years from its date of incorporation / registration instead of the extant period of 7 years.

Investments into eligible Startups by Non-Residents, Alternate Investment Funds- Category i-registered with SEBI shall also be exempt under Section 56(2)(viib) of Income Tax Act beyond the limit of Rs 25 crores.

Funds from angels are subjected to over 30% tax if it is more than the fair market value. Introduced in Section 56 of the I-T Act in Budget 2012, it explicitly states that companies - from mature private enterprises to small startups – are liable to pay taxes on money invested at capital.

A startup will be eligible for exemption if- 
it is a private limited company which is recognized by DPIIT;
is not investing in building or land appurtenant thereto; land or building, or both, not being a residential house; loans and advances, other than those extended in the ordinary course of business; capital contribution made to any other entity; shares and securities; a motor vehicle, aircraft, yacht or any other mode of transport, the actual cost of which exceeds ten lakh rupees, other than that held by the startup; and jewellery other than that held by the startup as stock-in-trade in the ordinary course of business.
Startups would have to file a duly signed declaration with DPIIT for availing the exemption and it will then be forwarded to the CBDT by the DPIIT.