Timeline on Angel Tax

Giving a big relief for startup community, government has rolled out a new eligibility criteria, thus answering the angel tax woes. Now, an entity shall be considered a startup upto 10 years from its date of incorporation/registration instead of existing 7 years. An entity shall be considered a startup if its turnover for any of the financial years since its incorporation/registration hasn’t exceeded ? 100 crore instead of existing ? 25 crore. All investors shall be exempt up to an aggregate limit of ? 25 crore. 

Let's take a look on the timeline of Angel Tax

March 2012

Then FM Pranab Mukherjee proposes a 9 per cent tax on funding raised by start-ups, in his budget.

June 2013

SEBI formulates the tax–dubbed Angel Tax–under the SEBI AIF (Alternative Investment Funds) Regulations 2012 and exempts capital raised from SEBI-registered angel funds from the new tax.

September 2013

SEBI chalks out details of the tax including setting the investment range of angel investors at ?50 lakhs–?5 cr.

March 2015

SEBI constitutes “Alternative Investment Policy Advisory Committee” (AIPAC) under the chairmanship of Narayan Murthy for inputs and recommendations on Angel Tax.

January 2016

AIPAC recommends up to 50 per cent tax deduction on investments by SEBI-regulated angel funds.

June 2016

CBDT exempts start-ups funded by resident investors from angel tax.

December 2016

AIPAC submits its second report to SEBI with various recommendations.

January 2018

The start-up community in India starts an online petition, demanding revision of the angel tax structure.

April 2018

DIPP announced some relief, including three-year tax holiday, for angel funds that meet certain criteria.

December 2018

Many startups receive angel-tax notices; Ministry of Commerce and Industry takes notice; and angel tax is currently in deep freeze pending recommendations of a Department of Industrial Policy and Promotion committee that is looking into start-ups’ grievances.

SEBI- Securities and Exchange Board of India

SEBI AIF- SEBI Alternative Investment Funds

CBDT- Central Board of Direct Taxes

DIPP- Department of Industrial Policy and Promotion

AIPAC- Alternative Investment Policy Advisory Committee