New Delhi, Sep 23 (IANS) The Central Board of Direct Taxes (CBDT) has directed tax officials to handle income tax cases relating to startups with "utmost care".
The CBDT in a circular directed officials to submit a "final action taken" report on income tax grievances faced by startups within three working days.
"It is brought to your kind notice that the issues relating to startups are to be handled with utmost care. All the officers in your charge must be sensitised to handle such cases accordingly," the circular read.
"In case of any grievance, the preliminary action taken report is to be submitted to this office by the next day... Final action taken report in this regard is to be submitted within three working days of calling of the report by this office," it added.
The development assumes significance as the government had earlier decided to set up a dedicated cell under CBDT for addressing the problems faced by startups.
On August 23, Finance Minister Nirmala Sitharaman had said: "A startup having any income tax issue can approach the cell for quick resolution of the same."
Last month, the government had announced the withdrawal of the "angel tax" provision on startups and their investors.
Angel tax refers to income tax payable on capital raised by unlisted firms by issuing shares where the share price is considered in excess of the fair market value. The excess realisation is treated as income, and hence taxable under Section 56 (2) (viib) of the Income Tax (I-T) Act.
The government had earlier exempted companies tagged as startups by the Department of Promotion of Industry and Internal Trade (DPIIT). However, many companies which were yet to be considered as startups were under I-T scrutiny.
"The timeline for submitting final action taken report do look aggressive but sends out the key message that the government is serious about addressing startups' concerns," said Shefali Goradia, Partner, Deloitte India.
"The next step would be to recognise that venture capital and private equity investors too are important stakeholders in the startup ecosystem and similar relaxation is needed for them as well. There are many ambiguities in the applicability of S56 or deemed gift tax to investors at present. Now that we have anti-avoidance rules, complete withdrawal of S56 is in order," Goradia added.
About Gopi
Gopi Adusumilli is a Programmer. He is the editor of SocialNews.XYZ and President of AGK Fire Inc.
He enjoys designing websites, developing mobile applications and publishing news articles on current events from various authenticated news sources.
When it comes to writing he likes to write about current world politics and Indian Movies. His future plans include developing SocialNews.XYZ into a News website that has no bias or judgment towards any.
He can be reached at gopi@socialnews.xyz