CBDT Issues clarification over notices to Start-ups

Angel Tax on Start-Ups:

• Angel Tax refers to income tax on capital raised by unlisted companies through off-market share transactions.
• It aims to prevent money laundering and round-tripping of black money.

Key Points:

• Angel Tax applies to unlisted companies issuing shares at prices exceeding their fair market value.
• Introduced in 2012 to combat black money laundering.
• Budget 2023-24 expanded the tax to include foreign investors but exempted recognized start-ups.
• The current tax rate is 30.6%.

Why in News:

• Tax notices were being sent to start-ups by the government.
• Now, the CBDT (Central Board of Direct Taxes) has issued a clarification. It said that start-ups registered with Department for Promotion of Industry and Internal Trade would not be investigated under the Angel tax provisions.