{"id":22257,"date":"2019-07-23T15:21:43","date_gmt":"2019-07-23T09:51:43","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=22257"},"modified":"2022-09-13T16:27:13","modified_gmt":"2022-09-13T10:57:13","slug":"startup-news-200-penalty-for-misuse-of-angel-tax-exemption","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/startup-news-200-penalty-for-misuse-of-angel-tax-exemption\/","title":{"rendered":"Startup News: 200% Penalty for Misuse of Angel Tax Exemption"},"content":{"rendered":"<p class=\"has-drop-cap\">The provision of Angel Tax is making rounds of news in the startup world ever since its incubation. In recent developments, the government has issued another notification addressing the <a href=\"https:\/\/enterslice.com\/learning\/angel-tax-its-effects-on-indian-startups\/\"><strong>applicability of Angel Tax<\/strong><\/a>. The misuse of Angel Tax Exemption is now under scrutiny of the authorities.<\/p>\n\n\n\n<p>The notification came in the form of an <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Amendment&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;An &amp;quot;amendment&amp;quot; refers to the formal change or correction of a legal document, often involving additions, variations, or deletions to address irregularities or clarify points in an agreement.(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/amendment\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>amendment<\/a> in the Finance&nbsp;Bill for the Finance budget 2019-2020.<\/p>\n\n\n\n<p>The leading news is that the government introduced a clause for a 200% penalty on startups failing to comply with the norms of Angel Tax.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Highlights of the Notification <\/strong><\/h2>\n\n\n\n<ul><li>Loksabha amended the Finance Bill<\/li><li>The startups fail to meet the norms will face a 200% penalty<\/li><li>The bill is in waiting to be passed by the Rajya sabha<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Proposal of 200 % Penalty <\/strong><\/h2>\n\n\n\n<p>The government amended the Finance Bill for 2019-2020 and proposed a penalty up to 200 % of Angel Tax for the startups misreporting on the Angel Tax front.<\/p>\n\n\n\n<p>The startups will be liable to pay <a href=\"https:\/\/enterslice.com\/learning\/angel-tax-for-startups-in-india\/\"><strong>Angel Tax  for startups<\/strong><\/a> along with penalty up to 200% if it fails to follow the norms laid by the <strong>Department for Promotion of Industry<\/strong>&nbsp;<strong>and Internal Trade<\/strong> (DPIIT).<\/p>\n\n\n\n<p>DPIIT is the nodal authority for the promotion and development of internal trade and industry.<\/p>\n\n\n\n<p>The DPIIT notification states the eligibility criteria for exempting Angel Tax. As per it, the startup needs to attest that it had not invested in any unused land, vehicle costing more than 10 lakhs, and jewelry.<\/p>\n\n\n\n<p>The startups who are seeking Angel Tax exemption under Section 56(2) (vii-b) of the <strong>Income Tax Act<sup><a href=\"https:\/\/www.incometaxindia.gov.in\/pages\/acts\/income-tax-act.aspx\">[1]<\/a><\/sup><\/strong> fall under this ambit.<\/p>\n\n\n\n<p>Additionally, startups are not permitted to lend loans and advances.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>A Welcome Move to Good Governance<\/strong><\/h2>\n\n\n\n<p>The government intends to promote a healthy startup growth culture. As per the reports, this move will curb startups misusing the angel tax rule and help genuine startups.<\/p>\n\n\n\n<p>The Finance minister of India Nirmala Sitharaman emphasized startup development in her budget speech. As per the Finance Minister, the growth of startup culture is vital for the Indian Economy.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote mb-5\"><p>&ldquo;All the startups are allowed to receive angel tax exemption regardless of their share premium values given that the aggregate amount of paid-up share capital and share premium of the startup after issue or proposed issue of shares, if any, does not exceed, INR 25 Cr.&rdquo;\n<\/p><p>&ldquo;To resolve the so-called &lsquo;angel tax&rsquo; issue, startups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums,&rdquo;<\/p><p>&ldquo;The issue of establishing the identity of the investor and source of his funds will be resolved by putting in place a mechanism of e-verification. With this, funds raised by startups will not require any kind of scrutiny from the Income Tax Department,&rdquo;<br><em>&nbsp;<strong> As Quoted by Nirmala Sitharaman<\/strong><\/em><\/p><\/blockquote>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Reason for Amendment in the Finance Bill<\/strong><\/h2>\n\n\n\n<p>Ever since the angel tax came in, there were speculations of its misuse. The ways to abuse of angel tax exemption were cited in form <a href=\"https:\/\/enterslice.com\/learning\/income-tax-exemption-and-calculation-process-of-gratuity\/\"><strong>income tax exemption<\/strong><\/a> to money laundering acts.<\/p>\n\n\n\n<p>The notification for Angle tax exemptions was made public as on May 27,2019.<\/p>\n\n\n\n<p>The amendment was made to prevent any activity of money laundering or window dressing of books via angel funding route. The government will be able to filter genuine startups that need support from startups misusing these initiatives of the government.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/enterslice.com\/learning\/startups-get-angel-tax-relief-dpiit-secretary\/\">541 Startups Get Angel Tax Exemption: DPIIT Secretary\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The provision of Angel Tax is making rounds of news in the startup world ever since its incubation. In recent developments, the government has issued another notification addressing the applicability of Angel Tax. The misuse of Angel Tax Exemption is now under scrutiny of the authorities. The notification came in the form of an amendment [&hellip;]<\/p>\n","protected":false},"author":14,"featured_media":22258,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[593,2410,20],"acf":{"service_id":"250"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Startup News: 200% Penalty for Misuse of Angel Tax Exemption-Enterslice<\/title>\n<meta name=\"description\" content=\"The stratsups are subjected to a penalty of 200% if they fail to comply DPIIT norms for Misuse of Angel Tax Exemption as per the amendment in Finance Bill.\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/startup-news-200-penalty-for-misuse-of-angel-tax-exemption\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Startup News: 200% Penalty for Misuse of Angel Tax Exemption-Enterslice\" \/>\n<meta property=\"og:description\" content=\"The stratsups are subjected to a penalty of 200% if they fail to comply DPIIT norms for Misuse of Angel Tax Exemption as per the amendment in Finance Bill.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/startup-news-200-penalty-for-misuse-of-angel-tax-exemption\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2019-07-23T09:51:43+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-09-13T10:57:13+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/07\/Angel-tax.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"712\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Akash Dubey","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/04\/DSC_04891.jpg","authorDescription":"Akash Dubey is a Law Graduate and works as an\r\nAdvisor at Enterslice. He is proficient in Legal\r\nand Financial Advisory. His expertise in the\r\nskills of Legal and Financial Research is an aid\r\nto his strengths as an Advisor.","postViews":443,"readingTime":2,"nextPost":{"id":22264,"slug":"overview-of-financial-technology-institutions"},"prevPost":{"id":22179,"slug":"read-the-amazing-history-of-income-tax-of-india"},"featuredMediaUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/07\/Angel-tax.jpg","postTerms":"Startup","_links":{"self":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/22257"}],"collection":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/users\/14"}],"replies":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/comments?post=22257"}],"version-history":[{"count":0,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/22257\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media\/22258"}],"wp:attachment":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media?parent=22257"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/categories?post=22257"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/tags?post=22257"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}