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Centre may relax angel tax norms for start-ups, sets up panel
- The government has set up a five-member working committee to look into the angel tax issue and come up with guidelines.
- Startups, who rely heavily on this funding, have raised concerns over levying taxes on angel funds under Section 56 of the Income Tax Act.
- Angel funds refers to a money pool created by high net worth individuals or companies (generally called as angel investors), for investing in business startups. They invest at very early-stage of businesses where other institutional investors such as venture capital funds or private equity funds hesitate to invest.
- Introduced by Finance Minister in 2012 under the Finance Act 2012, it is currently pegged at 30.9%
- The government has refused to scrap the tax as it fears misuse for money-laundering by shell companies.
- Government has recently amended the definition of start up to raise (a) age of company from 7 to 10 years and (b) funding above 25 crores as against 10 crores earlier.
