This is sure to bring smile on the faces of entrepreneurs. The General Anti-Avoidance Rules (GAAR) which threatened to affect the VC’s, angel investors the most has been deferred by Government for a year.
In the Finance bill, it was announced that Funding of startups could be one of the heads classified as an income and was taxable under (GAAR). GAAR was intended to be introduced from April 1, 2011, but there were lot of gray areas as well as fierce opposition from Industry bodies.
Finance Minister, Pranab Mukherjee, in his speech to the Parliament yesterday proposed to exempt angel investments from the purview of the proposed share premium tax. He said:
It has been proposed in the Finance Bill that any consideration received by a closely held company in excess of the fair market value of its shares would be taxable. Considering the concerns raised by ‘angel’ investors who invest in start-up companies, I propose to provide an enabling provision in the Income Tax Act for exemption to a notified class of investors.
This is sure to come as a major boost to entrepreneurial space which threatened angel investments in India!
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Actually GAAR is a very great concept for tax evasion but the draft prepared by Indian government is too harsh for entrepreneurs. We should take example of USA, Germany, Australia etc. They have a very sound GAAR guidelines.
they should encourage investors to fund new start ups and not tax them in every possible way.
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