Listening to the Finance Minister’s speech while delivering her maiden budget, you would have carried the impression that the government has listened to startups in the country with many of their concerns being addressed. Now the income tax department may be getting down to implementing some of the announcements made in the budget speech of the FM.
With regard to Angel tax, one of the biggest concerns startups had, a new set of tax return forms will be rolled out by September. This will be aimed at saving angel investors and startups from any questioning by tax officers.
“We would be modifying the return forms, which will allow the system to check if the investment made in the startup is genuinely made by someone capable of making that kind of investment,” ET quotes a senior government official as saying. This situation is being addressed through a e-verification process, by which the angel investor could fill in a few online forms which will include details of his/her own tax return details and the department can verify and not go beyond that.
This will also mean the startup where the angel investor has made the investment will not be subject to any questioning by the tax officials. This virtually removes one layer of physical interaction the investors in startups will have with the taxman, something every citizen will feel happy about. This mechanism will be in place by September, according to the IT department.
Now it appears the Central Board of Direct Taxes, CBDT has issued clear guidelines down the line to its field officers in the income tax department that the old and pending cases of investments in startups taken up for scrutiny be also sorted out with the same spirit.
The other measure announced by Nirmala Sitharaman in her budget speech regarding concessions to startups relates to the category-II Alternative Investment Funds (AIFs) which have now been added to the category-I AIFs exempting them from scrutiny of the value of shares held by them in startups.
These steps by the government must come as good news for the promoters of startups as they have a couple of things less to worry about.