In a way, startups in India are paying for what parliamentarian YS Jagan Mohan Reddy did in 2012. In Bengaluru alone, scores of startups have been slapped with notices from the Income Tax department over the last year. Most of them are around a certain Section 56 (2) (viib) of the Income Tax Act, 1961. Startup folks know this section as “Angel Tax” but the IT department officers have a more characteristic name for it.
Pound of flesh
Angel Tax and the harangued champions of change
Glitzy government events and grandiose program announcements encouraging startups are one thing. But as they get flooded by “Angel Tax” notices from the IT department, now is when startups really need the government to intervene. The IT department says it is merely following orders
Startups faced with the angel tax issue are totally at the mercy of the income tax assessment officer's judgement of the company's valuation
Besides angel tax notices, startups are facing questions on various other accounting issues as well
For angel investors, this move is a big investment deterrent
IT Department officials says only the government can find a solution to this issue