Income Tax dept relaxes assessment and scrutiny norms for start-ups

The income tax (I-T) department has relaxed its assessment and scrutiny norms for start-ups.

In a circular it directed its officers not to raise additional tax demands for start-ups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT).

This will be done in cases where scrutiny is limited to Section 56 (2) (viib) of the Income Tax Act, or what is called in popular parlance angel tax.

Angel tax refers to income tax payable on capital raised by unlisted firms by issuing shares where the share price is considered more than the fair market value.

“No verification on such issues will be done by the AOs (assessing officers) during the proceedings and the contention of such recognised start-up companies on the issue will be summarily accepted,” the circular said.

In cases where start-ups are recognised by the DPIIT but scrutiny involves wider issues, the I-T Department has asked its field formations not to pursue the issue of the angel tax during the assessment proceedings.

So far as other issues are concerned, the AO can go ahead with his or her inquiry or verification after the approval of supervisory officers. In a situation where start-ups are not recognised by the DPIIT, assessing officers have been asked to seek the approval of their supervisory officers to go for inquiry or verification about any issue. #casansaar (Source - Business Standard)