All CBDT circulars on angel tax consolidated
The Central Board of Direct Taxes (the “CBDT”) issued a circular consolidating all the circulars/clarifications issued with respect to the ease of compliance for start-ups with regards to angel tax (“Circular”).
The Circular highlights the following items:
(a) Simplification of process of assessment of start-ups – The CBDT clarified that all cases of angel tax initiated against start-ups recognized by the Department of Promotion of Industry and Internal Trade (“DPIIT”) will be dealt with “limited scrutiny”. This means that unless the assessing officer’s supervisory officer objects, the assessing officer will accept the contentions of the start-ups;
(b) Time limit for completing pending assessments of start-ups- The CBDT has clarified that it will take up all cases relating to start-ups on priority. It aims to complete all cases involving “limited scrutiny” by September 30, 2019 and cases not involving “limited scrutiny” (these are cases initiated (a) for issues other than angel tax; and/or (b) against a start-up not recognized by the DPIIT) by October 31, 2019;
(c) No new cases of angel tax– The CBDT has clarified that unless confirmed or directed by the Income Tax Appellate Tribunal, no new case of angel tax will be initiated against a start-up; and
(d) Constitution of Start-up Cell – The CBDT has constituted a start-up cell in order to assist start-ups with any issues they face with regards to income tax. Start-ups can write to startupcell.cbdt@gov.in to share their grievances.
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Although the CBDT has communicated all the above announcements through circulars, clarifications or press releases, start-ups will find it helpful that the CBDT has consolidated all circulars relating to start-ups in the Circular. This way, start-ups need to focus only on the Circular to know the benefits that they are entitled to.
However, the CBDT, while outlining that it will not initiate any new case of angel tax against a start-up, has not clarified whether this is applicable only for start-ups recognized by the DPIIT or if this is applicable for all start-ups in India. If the CBDT intends to make this applicable for all start-ups in India, then the CBDT will need to outline the definition or the parameters that an entity will need to comply with in order to be considered as a start-up. We hope that the CBDT will issue a new circular/clarification soon in order to resolve this ambiguity.
Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.