DIPP raises angel tax issue with revenue dept

NEW DELHI: The department of industrial policy & promotion (

DIPP

) on Wednesday said it has taken up the issue of '

angel tax

' notices being sent by the income tax (I-T) department to startups with the Department of

Revenue

(DoR).


"DIPP has again taken up this matter of issue of I-T notices with the DoR so that there is no harassment of angel investors or startups. Government is committed to protecting bona

fide

investments into startups," a DIPP spokesperson said in a press statement. Several startup founders had alleged earlier this week that they have been receiving notices from the tax department to clear taxes on angel funds raised by them. Originally meant to curb

money laundering

, angel tax is a 30% tax levied on investments made by external investors in a company or startup.

It, however, comes with a caveat: The entire investment is not taxed but only the amount that is considered above fair value (valuation) of the startup is taxed under income from other sources. As the valuation of startup is often subjective, angel tax has been a bone of contention between the startup community and the tax department. A startup raises angel funds during its initial phase.