The decision to relax income tax on angel funding, known as angel tax, has brought cheer among startups even as some associated with the ecosystem are apprehensive over its benefits owing to the riders attached to it.
Angel funding is the capital provided by high-net-wroth investors to business startups, usually in exchange for convertible debt or ownership equity.
The Union government has extended angel tax concession from ₹10 crore to ₹25 crore.
“It will ensure easy flow of funds to startups, resulting in creation of more jobs. IT will also give a boost to the startup environment in the State,” IT Association of Andhra Pradesh (ITAAP) president R.L. Narayana told The Hindu .
However, some experts have expressed doubts. Though the turnover limit has been increased to ₹100 crore for a duration of 10 years, some key points may act as a dampener for many startups, StartAP CEO Siddharth Marupeddi said.
“These regulations are a hindrance to home-grown innovation and founders will get busy with bureaucratic norms. For instance, there is no clarity on relaxation of Section 68 and 56 on the valuation,” he pointed out.
A startup with bulk angel investment seeking exemptions needs to furnish a declaration to DIPP, stating that it would not invest in heavy commercial vehicles, immovable properties, loans and capital contribution to other entities.
This, some experts point out that would hamper the growth of startups.
