The Department for Promotion of Industry and Internal Trade (DPIIT), on 19 February 2019, notified revised conditions to claim exemption from tax under section 56(2)(viib) of the Income-tax Act, 1961 (ITA).
Section 56(2)(viib) of the ITA levies a tax (angel tax) on share premium received by private companies for the issue of shares at a price higher than the fair market value of the shares, as computed for tax purposes.
As per the 19 February notification, the exemption from angel tax will be available to a startup: (a) which has been recognized by the DPIIT; (b) whose aggregate paid-up share capital and share premium after issue or proposed issue (excluding investment by non-residents, venture capital companies and venture capital funds, and specified companies) does not exceed ₹250 million (US$3.5 million); and (c) which has not invested in any specified assets (such as a building or land used for purposes other than its business or for renting or held as a stock in trade, loans and advances other than those extended in the ordinary course of business, capital contribution to any other entity, shares and securities etc.).
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The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bengaluru, Singapore, Silicon Valley, Munich and New York. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.
