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Govt raises startups turnover limit to Rs 100 cr

At present, the ‘startup’ tag is given to a company which is up to 7 years old.

News wave@ New Delhi

GOI proposals aimed at widening the definition of startup and easing investor worries over angel tax, a move that is seen as a shot in the arm for the pre-listing space. The step is expected to boost angel investment flows into India.

Under the proposals cleared, an entity will be considered as a startup up to a period of 10 years from the date of incorporation. At present, the ‘start-up’ tag is given to a company which is up to 7 years old.

Besides, an entity will now continue to be recognised as a startup if its turnover for any of the financial years since incorporation and registration has not exceeded Rs 100 crore, as against Rs 25 crore limit at present.
“Raising the turnover limit to Rs 100 crore instead of the present Rs 25 crore for defining an entity as a startup expands the scope for angel tax exemption for many fledgling startups which are struggling to get off the ground. A wider relief from angel tax is bound to expedite angel investment inflows into the Indian startup sector,” said Ameve Sharma, Founder, Kapiva Ayurveda.

Startups whose share premium does not exceed Rs 25 crore may get immunity from taxation. Currently, this limit is as low as Rs 10 crore. It is believed that the move will cover at least 70-80 per cent of startups. The Rs 25 crore limit will exclude any consideration received from non-residents, Sebi-registered alternative investment funds (Category 1) and frequently-traded listed companies with net worth of Rs 100 crore or turnover of at least Rs 250 crore.

In addition, consideration received by eligible startups for shares issued or proposed to be issued to a listed company having a net worth of Rs 100 crore or turnover of at least Rs 250 crore will also be exempted,DIPP said in a statement.
“The relaxation announced for angel tax implication was due and is definitely a welcome move. However, we were also expecting the government to relax some of the provisions of GST and TDS on startups which would help them better with the cash flows,” said Piyush Bothra, CFO at Square Capital.
Startups will be eligible for exemption under Section 56 (2) (viib) of the Income Tax Act, if it is a private company recognised by DPIIT and is not investing in building or land, being a residential house, other than that used by the startups for the purposes of renting or held by it as stock-in-trade, in the ordinary course of business.
It is not applied to startup loans and advances other than loans or advances extended in the ordinary course of business where the lending of money is substantial part of its business

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