Through a flurry of tweets, DIPP announced the changes that were made to alleviate the Angel Tax problem that the early stage ecosystem has been continuously grappling with. In a recent post I had put forth my own views on how the government could resolve these issues by accrediting angel investors, and to my surprise DIPP did accredit angel investors (in a way) in the notification made on the 16th of January.
There were several reactions to the notifications which ranged from the positive…
- All Hail startups! Govt Liberalises Conditions for Angel Tax Exemption
- Angel Tax Won’t Haunt Startups any Longer
- Won’t Stop The Startups: Government Simplifies Angel Tax Exemption Norms; Application To Be Processed Within 45 Days
….to the cautiously optimistic
- Yes, the DIPP Has Provided a Breather on Angel Tax Assessments, but Major Changes are Still Pending
- Partial Relief For Start-Ups As Centre Eases Angel Tax Exemption Rules
- Angel tax: Startups Find Much-Awaited Relaxation in Norms by Govt to be Half-hearted
I believe that the government’s baby steps toward rectifying the angel tax issue is a good sign. I also believe that there will be more incremental changes on the anvil and the biggest positive take away from these notifications is that the government is listening and (more importantly) acting.
However, I do feel that DIPP could have invited better representation that just the heads of angel groups. Most of them stand on behalf of investors but rarely make angel investments on their own. Instead the angels that are writing cheques, dealing with founders and tax authorities regularly are the ones who should be getting invited to provide their inputs. A minimum criterion of 25 investments in the last 3 years could be a good starting point. These angels’ inputs would be valuable as they would make the next set of changes more acceptable.
A couple of the changes that I would like to propose to DIPP
@dippgoi This is a much needed move but in the future…— Anirudh A Damani (@showmedamani) January 18, 2019
1. Is the startup supposed to verify the income of the investor by asking for their income tax returns?
This creates unnecessary friction between the founder & funder. Instead DIPP can ask investors to register 1/3
Let’s see what the next set of changes are going to be!