In a relief to startups on the issue of angel tax, the DIPP issued a statement stating that it will take up the matter again with the department of revenue to prevent harassment of startups and to protect bonafide investments in the ecosystem. Several startup founders across the country said they have received tax notices for funding raised in the last few years, with the tax amount reaching up to 30% of the fund raise. The method of valuation has been at the core of the issue. While the government had issued a notification earlier this year to give exemption to startups under Section 56 of the Income Tax Act in cases where the total investment including funding from angel investors does not exceed Rs.10 crore, it still entailed tedious steps such as getting an approval from an inter-ministerial board, and a certificate of valuation by a merchant banker.

(Economic Times)