Are you a high net worth individual looking to make new tax free investments? You may soon be able to do that by investing in start ups and pay no angel tax. This is what one wing of the Narendra Modi government is working towards, convinced this will help achieve goals under Startup India, Digital India, boost entrepreneurship and also make banking channels more competitive in giving loans.
The government is planning to set up a new category of accredited investors, including high net worth individuals, which can make tax free investments into startups even above the current threshold of Rs 25 cr.
Although the plan is still under works, initial proposals suggest providing accredition to businesses, individuals with minimum net worth of Rs 25 cr and annual turnover of at least 50 lakh, sources said.
This in turn, would allow huge capital inflows, boosting the startup ecosystem in the country, sources in the know of the matter told ET Now.
“The idea is that startups should be able to attract investments from all sources…We would like to include unlisted companies, trusts, LLPs (Limited Liability Partners)…the criteria for accredition is under discussion but we would want to introduce it at the earliest,” DPIIT Secretary Ramesh Abhishek told ET Now.
Currently, only the listed companies, with an annual turnover of Rs 250 cr and net worth of Rs 100 cr, get a tax exemption for investments over Rs 25 cr in startups. Individuals do not get an exemption even within the threshold.
The accredition process will reduce the troubles for startups raising more than Rs 25 cr from HNIs or family offices as they wouldn’t have to worry about proving the genuineness and credit worthiness of investors to income tax department, Ashish Chaturvedi, founder, School Diary said.
Although investor accredition will help in mobilising more capital for startups, the government should also take care that the process is well balanced and there is appropriate compliance and transparency, Nupur Garg, Regional Lead for Private Equity and venture funds, International Finance Corporation warned.