Just 1% of the more than 98,000 start-ups recognised by the Commerce and Industry Ministry have been able to avail Income Tax exemptions six years after the sop was announced, prompting a Parliamentary panel to ask the government to relax the norms and clarify the process.
The Department Related Standing Committee on Commerce, in a report on the start-up ecosystem tabled on Thursday, also expressed concern that only 10,165, or 10.4%, of the 98,119 recognised start-ups have even applied for the tax sops.
Moreover, a ‘staggering 75% of the applications’ were being sent back for ‘resubmission,’ indicating a lack of clarity among start-ups on the process, it flagged.
Expressing concern about the low utilisation of Section 80-IAC of the Income Tax Act, 1961, which was implemented in 2017, the panel noted that an inter-ministerial board has granted the Certificate of Eligibility to only 1,173 applicants as on March 31, 2023.
Urging the government to review the norms so that more start-ups could avail the tax benefits, the committee also urged the Department of Commerce to work with stakeholders and the Finance Ministry to ensure that the residual concerns about the Angel Tax on start-up funding are resolved.
“The Committee is also of the view that the methodology adopted to ascertain the Fair Market Value of shares needs to be unambiguous as it influences taxation for a domestic or foreign investment. A decision to remove the confusion in this regard is required to be taken in consultation with all the stakeholders,” the Committee said.
