By Anshul May 25, 2023 8:24:41 PM IST (Updated)
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The Central Board of Direct Taxes (CBDT) on Thursday, May 25, exempted certain categories of investors from the provisions of Section 56(2)(VIIB) of the Income Tax Act. This deals with angel tax, which is the tax payable by privately-held companies on the issue of shares at a rate higher than the fair market value.
The angel tax provisions will not apply to the following non-resident investors :
The exempt country list includes Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Iceland, Israel, Italy, Japan, Korea, New Zealand, Norway, Russia, Spain, Sweden, United Kingdom and the United States.
Additionally, consideration received by DPIIT registered startups will not attract angel tax levy.
Welcoming the step, Punit Shah, Partner at Dhruva Advisors, said these benefits may not be available to several large private equity funds who invest in India through jurisdictions such as Mauritius and Singapore.
"Also, the broad-based funds are defined as having more than 50 investors. Hence, it would be interesting to see whether this benefit is extended to such pooling vehicles making investments in India through specific SPVs located in non-specified jurisdictions," Shah said.
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