Startups hail angel taxation relief

startup [File] Representative image

Startups have hailed the government's move to ensure full angel tax concession on investments up to Rs 25 crore. Many startups THE WEEK spoke to feel that the move was long overdue. This will help them better their cash flows in the long run, and help them expand their business, they said.

Abhishek Gandhi, the co-founder of NBFC P2P startup RupeeCircle, feels that the relaxation has come at the right time, as they were planning to raise capital this year. The amount they are looking at is around Rs 20 crore. “With the new exemption limit, we expect more corporates to be looking out for avenues of investment, which is a positive sign for the entire startup ecosystem. Also, broadening the definition of a startup would ensure that a company can be under the startup umbrella for a longer period of time and enjoy the perks of being a startup for a longer period. This would help the startups grow faster and stick to the long-term plans,” said Gandhi.

Similarly, Pranav Maheshwari, the co-founder of Vista Rooms, a startup in the hospitality space, feels that such a move will have a huge impact on the entire ecosystem. “We are looking to raise $3 to 5 million this year. Since we have been in existence for only about three years, this change isn't as important for us in the short term. But, this is going to have a huge impact. More startups can benefit from this. Once a company has crossed the Rs 100 crore mark, it is likely that they are a fairly large organisation in terms of both financial and human capital. Hence, capping it at Rs 100cr is a sensible way to categorise a startup,” said Maheshwari.

Piyush Bothra, the CFO of Square Capital, feels that the startups in the country are rendering great service in almost all sectors of the economy and are providing gainful employment opportunities for the youth, acting as a platform for them to exhibit innovation and talent. “The relaxation announced by the government today for angel tax implication on startups is long overdue and definitely welcome. However, we were expecting the government to relax some of the provisions of GST and TDS on startups which would help them better the cash flows,” explained Bothra.

Tax expert S. Vasudevan, partner at Lakshmikumaran & Sridharan Attorneys, feel that the stated exemptions may provide much needed relief to the relatively larger sized startups (having turnover upto Rs 100 crore, instead of the earlier threshold Rs 25 crore) who may have been required to pay tax on premiums received on share subscription. “However, many of these reliefs will require amendments to the Income Tax Act 1961, and the startups may have to wait until then to avail these benefits. It is to be noted that, with respect to section 68 of the Act, no relief is proposed. So the startups will continue to carry the onus to establish the genuineness of the source of the investment, failing which the sums received on share application can be taxed by the department,” explained Vasudevan.