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NASSCOM, Indian Private Equity, TiE and others ask govt to abolish angel tax

Industry bodies NASSCOM, TiE Global, Indian Private Equity & Venture Capital Association (IVCA), Chennai Angels, India Angel Network and Rajasthan Angels have jointly written to the Union government asking it to abolish the ‘angel tax’. Addressed to the Finance Minister Arun Jaitley and Minister for Commerce and Industry Suresh Prabhu, the letter states that the ‘Start up India’ program has run into severe implementation problems due to ‘angel tax’ imposed on startups under Section 56 of Income Tax Act. “The angel tax penalizes startups simply because premium is paid or discount given on the sale/purchase of shares,” states the letter. MediaNama has reached out to TiE Bangalore president Ravi Gururaj, and will update this when we hear from him. “There is no empirical evidence to show that there exists any systemic menace in this regard. If there is any investor who cannot explain the source of the investment, we suggest, by all means go after that investor but presuming every investor paying premium or getting discount should not be deemed criminal and be penalized," says the letter (emphasis added). The angel tax is an income tax payable on capital raised by privately held companies when the share price offered seemingly exceeds the fair market value of the shares. The tax was introduced in 2012 by the then Finance Minister Pranab Mukherjee to restrict money laundering of the funds. Startups got tax notices despite norms In April 2018, the government had issued a notification exempting investments of up to Rs 10…

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