• The government decided to set up a five-member working committee to look into the angel tax issue and come up with guidelines in one week.
  • It also agreed to implement some key changes requested by start-ups regarding the issue.
  • The ‘angel tax’, as it is commonly called, is a tax on the excess capital raised by an unlisted company through the issue of shares over and above the fair market value of those shares.
  • This excess capital is treated as income and taxed accordingly.
  • This tax most commonly affects start-ups and the angel investors who back them.
  • According to a January 16 notification, start-ups whose aggregate amount of paid-up share capital and share premium after the proposed issue of share does not exceed ₹10 crore are eligible for exemption from the tax.
  • Officials representing the government agreed to raise this limit to ₹25 crore.
  • They also agreed to amend the definition of a start-up to include companies that have been in operation for up to 10 years rather than the previous limit of seven years.
  • On the investor side, the notification had said that the angel investor should have filed income tax returns of at least ₹50 lakh for the year preceding the year in which the investment was made and have a net worth of ₹2 crore.