In an attempt to make it easier for start-ups to attract investments, the Centre has introduced some amendments in rules including a clarification on angel investors funding and allowing online applications for start-up certification.

The government on Thursday allowed start-ups to avail tax concession only if total investment including funding from angel investors does not exceed ₹10 crore.

As per a notification by the Commerce and Industry Ministry, an angel investor picking up stakes in a start-up should have a minimum net worth of ₹2 crore or should have an average returned income of over ₹25 lakh in the preceding three financial years.

“For the purposes of Section 56 of the Act, there is no restriction on class of investors and eligible start-ups can receive investment from any person against issue of share capital,” a press statement issued by the Department of Industrial Policy and Promotion on Thursday stated.

In June 2016, the government had notified that angel investors funding to approved start-ups shall be exempt from incidence of tax under Section 56(2)(viib).

But there was uncertainty on the kind of investments that would get covered and there were also rising income-tax cases against start-ups for non-payment of angel tax. As many as 18 start-ups have got notices from tax authorities.

A start-up set up as a private limited company or limited liability partnership incorporated after April 1, 2016, would be eligible for tax concessions. However, the demand for allowing start-ups incorporated before April 2016 to be eligible for tax sops remains unaddressed.

As per the new amendment notified on April 11, the DIPP has constituted a broad based inter-ministerial board to consider applications of start-ups for claiming tax incentives. The incentives include exemption from levy of income tax on share premium received by eligible start-ups under Section 56 of the Act and a 100 per cent deduction of the profits and gains from income of start-ups for three out of seven consecutive assessment years under 80 IAC.

Under the new rules, applications for certification of start-ups under Section 56 and Section 80 IAC of the Act will be submitted through an online portal to DIPP. These applications will be considered by IMB for certification.

“With the introduction of amendments through this notification, startups are likely to have easy access to funding which in turn will ensure ease in starting of new businesses, promote startup eco-system, encourage entrepreneurship leading to more job creation and economic growth in the country,” the release stated. #casansaar (Source - PTI, The Hindu Business)