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The Central Board of Direct Taxes (CBDT) has brought the 'angel tax' exemption provisions in sync with the new revised regime put in place by the Department for Promotion of Industry and Internal Trade (DPIIT) from February 19 this year.
Accordingly, capital received by startups upon satisfaction of the conditions prescribed by DPIIT's February 19 notification will not be chargeable to tax under Section 56(2)(viib)--popularly referred as Angel Tax provision, the CBDT said on Tuesday.
It may be recalled that the Government had on February 19 through DPIIT put in place a new regime that waived an earlier requirement to obtain approval for availing 'Angel Tax' exemption. This was done as part of Government's efforts to remove barriers encountered by startups.
To effectively implement the new DPIIT regime, the CBDT has now superseded the notification it issued in May 2018 and issued a fresh one on Tuesday.
Experts' take
Tax experts, however, highlighted that the latest CBDT move --bringing it in sync with DPIIT regime --does not address the woes of those Startups who are already faced with taxman's demands for 'angel tax' (cases prior to February 2019)
Rakesh Nangia, Managing Partner, Nangia Advisors (Andersen Global) said this CBDT latest move is just a procedural notification that was required to be issued to put in place the mechanics for claiming benefits given to Startups vide DPIIT notification dated February 19.
"This notification (CBDT) does not make any new changes addressing the woes of startups", he said.
Aseem Chawla, Managing Partner, ASC Legal, a law firm, said that the instant notification recognised the guidance issued by DPIIT on February 19.
"It remains to be seen at the assessment level how the February 19 guidance is interpreted by the tax department in implementing the same in its true spirit and object to grant the reprieve sought", Chawla said.
Sreejith, founder of True Elements, said this CBDT notification does not give a blanket exemption for startups who are faced with demand "orders like us".
But gives a hope, because of the retrospective line that one can use at the appeal stage and get an exemption, he said. "A blanket exemption could have solved time and efforts for the Department and us," he said.
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