CBDT directs AOs not to use coercive measures against start-ups

New Delhi, Dec 26 (KNN) In a relief for start-ups and angel investors, the Central Board of Direct Taxes (CBDT), working under the Union Finance Ministry, has directed Assessing Officers (AOs) not to use coercive measures to recover outstanding angel-tax dues.

The directions come after several start-up founders took to social media after receiving tax notices on what's come to be known as angel-tax.

The provision was introduced in 2012 to prevent money laundering through equity issuance and because it impacted angel investors in startups, it came to be called angel tax.

The letter issued says, “The matter is under consideration of the board. In view of the above, no coercive measures to recover outstanding demand should be used in the matter till further instructions.”

This follows a high-profile meeting between the Departments of Revenue and Industrial Policy and Promotion (DIPP) and CBDT, following concerns over the large number of tax demands made from startups.

CBDT said there will be no coercive measures to recover tax.

CBDT also announced setting up of a new review committee by DIPP. 

Under the section, the amount realized in excess of the fair value of shares from investors is considered as income and taxed as such that year.

It does not apply to startups recognized by DIPP.