Over 7,000 cash-starved start-ups may benefit from angel tax relief

Companies News:

A series of changes made to the so-called angel tax by the government could give wing to 7,000 cash-starved start-ups, sources in the Department for Promotion of Industry and Internal Trade (DPIIT) said.

According to industry observers, an investment of around $12 billion might come from 2,000 angel investors and hundreds of smaller backers of start-ups by the end of the year. Of this, about $7 billion will come in the form of corporate investment.

After facing sustained pressure over the past three years from start-ups and venture capital funds over the tax, the government introduced changes in tax norms, giving in to most of the demands raised by the sector.

Providing a wider set of exemptions from the angel tax, the Centre allowed start-ups which have raised capital up to Rs 25 crore to claim tax benefits, as distinct from the earlier Rs 10 crore. It also gave a slew of waivers and a tweak in definition industry demanded.

Expecting big gains: DPIIT

According to officials at the DPIIT, around 6,700 firms of the 16,000 start-ups registered with the nodal agency will benefit from the changes in the angel tax over the next six months.

 “Around 7,000 firms will get immediate benefit. It would be many more over time. Many companies on our list have grown beyond just being start-ups and fall in the tax bracket,” an official from the DPIIT said...Read More

2019 Interim Budget wish: Electronics makers seek Rs 1,000-crore seed fund

Interim Budget 2019:

With the 2019 interim budget round the corner, stakeholders in the electronics sector are expecting the government to create a seed fund of Rs 1,000 crore and abolish the angel tax that has hit start-ups hard.

“The Government should create a seed fund of Rs 1,000 crore, which can be matched by industry and VCs (venture capitalists), to provide seed funding to build 1,000 start-ups in the ESDM (electronic system design & manufacturing) space. We have requested the government to create such a fund in the budget in our wish list submitted to the ministry,” said Rajesh Ram Mishra, president, India Electronics and Semiconductor Association (IESA), the trade body representing the ESDM industry.
“We have also recommended to the government to abolish angel tax for ESDM start-ups," Mishra added. "Angel tax and the current policy of getting the start-up valuation done by a merchant banker are hitting ESDM start-ups very hard."

According to IESA, start-ups in electronics and semiconductor space primarily depend on angel and self-funding, as very few VCs in India are investing in ESDM companies.
Additionally, the association has also urged the government to enable research and development (R&D) through provisioning separate budget to fund projects of national interest in the electronics and semiconductor domain and enable collaborative R&D among public sector undertakings, SMEs and start-ups.


 With electronics becoming a key enabler in creating an ‘intelligent’ economy like smart homes, smart transportation, smart cities, the association has urged the government to provide support to create 50 intelligent electronics incubators collaborating with industry in various technology and industry verticals in mission mode similar to Atal Innovation Mission.