Lok Sabha Question No. 759 (UNSTARRED), answered on 2019-06-26
Subject: Tax Exemption to Start-ups
Ministry: COMMERCE AND INDUSTRY
Asked by: Y. S. Avinash Reddy

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE

## LOK SABHA

## UNSTARRED QUESTION NO. 759.

TO BE ANSWERED ON WEDNESDAY, THE 26 TH  JUNE, 2019.

## TAX EXEMPTION TO START-UPS

## 759.   SHRI Y.S. AVINASH REDDY:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:

## वाणिज्य एवं उद्योग मंत्री

- (a) whether the Government is contemplating on easing the norms providing tax exemption to the start-up companies on the investments made by the Angel Funds;
- (b) if so, the details thereof;
- (c) whether it is a fact that large numbers of start-up companies have requested the Government to provide tax exemptions and if so, the details thereof; and
- (d) the steps being taken by the Government in this regard?

## ANSWER

## वाणिज् य एवं उद्योग मंत्री (श्री पीयूष गोयल) THE MINISTER OF COMMERCE & INDUSTRY (SHRI  PIYUSH GOYAL)

Startups receiving investments from Ventures Capital Fund are exempt from taxation as per provision of Section 56, (2) (vii b) of Income Tax Act 1961 (Act). Angel Fund is sub category of Ventures Capital Fund under Category-I Alternative Investment Fund (AIF), hence, eligible for

- (a) & (b): the same exemption.

Several  round  of  discussions  have  been  held  by  Department  for Promotion  of  Industry  &  Internal  Trade  (DPIIT)  with the  Startup ecosystem  to  address  their  concerns.  Consequently,  a  notification number  G.S.R.  127(E),  dated  19th  February,  2019  was  issued  by DPIIT.  Central  Board  of  Direct  Taxes  (CBDT)  vide  their  notification number S.O. 1131(E) dated 5 th March 2019 has notified that provisions of Section 56 (2) vii(b) of Act shall not apply to consideration received by a company for issue of shares that exceeds the face value of such shares,  if  the  said  consideration  has  been  received  from  a  person, being a resident, by a company which fulfils the conditions specified in notification  number  G.S.R.  127(E),  dated  19th  February,  2019  of  the Department for Promotion of Industry & Internal Trade (DPIIT).

Department  of  Revenue  had  earlier  issued  an  advisory  on  24 th December,  2018  based  on  representations  received  from  various startup companies that no coercive measures to recover the outstanding amount should be taken for startup companies, if additions have  been  made  by  Assessing  Officer  under  Section  56(2)  vii(b)  of Income Tax Act, 1961 after modifying /rejecting evaluation so furnished under Rule 11 UA (2) of Income Tax Rule, 1962.

The  provisions  of  the  notification  number  G.S.R.  127(E)  dated  19 th February 2019  have been  fully implemented, easing norms for providing tax relief to Startups on angel investments.

- (c) & (d): DPIIT accepts applications and declarations from Startups applying for Angel Tax Exemption and on the receipt of the same DPIIT forwards these  applications  to  CBDT.  As  on  21 st June,  2019  a  total  of  944 applications for Angel Tax Exemption have been received. 39 applications have been found to be incomplete, and 203 applications were  repeat or  modified  applications.  CBDT  has  exempted  702 startups under this provision.

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