States Will Now Be Ranked On Startup Ecosystem; No Angel Tax For Startups With Rs 10 Cr Funding!

The Department of Industrial Policy and Promotion wants to track and monitor the startups of India, and in this endeavour, they have decided to rank states based on their startup ecosystem.

As per reports coming in, a 7-pillar framework will be created to gauge and judge the startup progress in these states, and ranking would be based on that.

Besides, DIPP has also announced that Angel Tax would be abolished for those startups, which have Rs 10 crore or less funding.

7-Pillar Framework For Ranking States On Startup Ecosystem

As per data from DIPP, there is a total of 6,875 recognized startups as of now, as per definition and conditions put forth by them, and out of them, 82% have received tax exemptions for consecutive 3 years out of 7 years.

DIPP will now create a 7-pillar framework to rank the states, based on the progress and development made by the startups from each state.

As of now, Maharashtra has the maximum number of startups which have received tax exemptions from DIPP, followed by Karnataka and New Delhi with 1,084 and 929 startups each.

Some of the other states from which startups have received tax exemptions include Uttar Pradesh, Haryana, Telangana, Tamil Nadu, Kerala, and Gujarat.

While announcing the creation of this 7-pillar framework, Suresh Prabhu, Minister of Commerce and Industry, said,

“We understand that in this entrepreneurial success journey states must be involved and encouraged. That’s what we aim to do with this States Ranking Framework.”, adding, “We are aligning our strategies to tap the infinite potential of young entrepreneurial minds. We are helping them in the journey from idea to business and business to success,”

DIPP will soon announce the metrics based on which the ranking would be done.

No Angel Tax for Startups With Rs 10 Cr Funding

Meanwhile, DIPP has abolished angel tax for those startups, which have received Rs 10 crore or less funding to date.

However, there is a catch here: Only those startups which were incubated before 2016 would be covered under this tax exemption.

Angel Tax was introduced in 2012 by then finance minister Pranab Mukherjee, and the main intention was to stop money laundering by block money hoarders, who used to buy shares on premium and convert their black money into white.

However, it seems that startups with less than Rs 10 crore funding are not prone to this strategy.

An official said,

“We have finalised the conditions which will resolve the issue of pre-2016 startups,”, adding, “We will have adequate safeguards that would be taken into account when a startup is examined for recognition,”

Angel tax is mainly applicable on the capital which is raised by startups in excess of the fair market value of their shares.

Govt. had earlier indicated that they are against such Angel Tax, as it is more of a measure to stop money laundering, rather than related to startups.

Finance secretary Hasmukh Adhia had said,

“If you get a valuation which is higher than DCF value, then we tax it. This is not an angel tax — this is an anti-evasion measure for us.”

2018 has started with a bang for startups, as some more exciting news are expected from the Govt.