Angel tax is levied when a privately-held company raises funds at a rate higher than its “fair valuation.” Currently, India charges 30% in angel tax. Over the past several months, many Indian startups have received tax notices from the income tax department. Several of these tax demands include sky-high penalties.
On Feb. 19, the government relaxed norms for companies that qualify as “startups” and can avail angel-tax breaks. Now, an entity is considered a startup for up to 10 years after its incorporation as compared to seven years earlier. The upper limit for the turnover of tax-exempt startups has been increased from Rs25 crore earlier to Rs100 crore.
But all this has still not made it easy to be an entrepreneur in India.