‘No Coercive Measures’: CBDT Directs Its Officials To Exercise Restraint While Collecting ‘Angel Tax’ From Startups

Central Board of Direct Taxes (CBDT), working under the Union Finance Ministry, has directed its Assessing Officers (AOs) to exercise restraint while recovering dues under the ‘angel tax’ category, reports Economic Times (ET).

“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,” a copy of the agency's letter stated.

This development comes after a high-profile meeting between officials of the Department of Revenue and Department of Industrial Policy and Promotion (under Union Commerce Ministry) to discuss the issue.

On 20 December (2018), the Union government moved to assuage the startup and VC (Venture Capital) community by stating that “genuine” investments in startups won’t attract tax liability despite exceeding fair market valuation.

The issue flared up after over two thousand startups were issued notices by the Union Corporate Affairs Ministry (MCA) regarding their funding patterns. Two years ago, Income Tax (IT) department had asked unlisted startups to pay upto 33 per cent tax if their valuations went down after the first round.

In January 2018, various Indian startups came together to file a petition asking the government to rollback the ‘angel’ tax.

Also Read: Understanding 'Start-Up Tax'