There could be more measures in the offing for startups following the budget announcements. The government is working on another set of measures that could be rolled out soon to make it easier for them to do business in the country.
A new set of tax return forms, aimed at saving angel investors and startups from any questioning by tax officers, will be rolled out by September.
“We would be modifying the return forms, which will allow the system to check if the investment made in the startup is genuinely made by someone capable of making that kind of investment,” a senior government official said.
The move is in line with the announcement on everification for angel investors in the budget.
The official said this will totally cut down any physical interface of startups and angel investors with tax authorities in the future. Tax experts said that collecting information via returns to establish the genuineness of the investment as well as the investor is the right approach
“With increased data mining and intelligence-gathering capabilities, it would not be difficult to map the information gathered with other data available and verify the genuineness of the investment,” said Amit Maheshwari, partner, Ashok Maheshwary & Associates.
The government had in April made some changes in one category of income-tax returns by including the shareholding of startups and investments in startups. The proposed set of changes will build on these. These will complement the e-verification process to establish the identity of the investor and source of his funds.
E-verification seeks to help establish the identity of the investor and source of his funds. Consequently, funds raised by startups will not require any kind of scrutiny by the income-tax department.
Besides, there is a clear directive from the apex body, the Central Board of Direct Taxes, to its field officers on tackling past cases concerning startups.
The government has extended the tax benefit to category-II Alternative Investment Funds (AIFs). These would also, like category-1 AIFs, not face scrutiny on the valuation of shares held by them in startups.
Source : Financial Express