CBDT notifies Exemptions to Startups on Income Tax Chargeable u/s 56(2)(viib) of Income Tax Act [Read Notification]

Suppressing the notification vide number S.O. 1131(E) dated 5th March 2019, the Central Board of Direct Taxes (CBDT) has notified the exemption to startups on income tax chargeable under the head ‘Income From Other Sources’ as per Section 56(2)(viib) of the Income Tax Act, 1961, deemed to have come in to force on 1st April 2023.

As per the new notification, the Central Government notified that the provisions Section 56(2)(viib) of the Income Tax Act which deals with imposition of income tax on income from other sources shall not apply to consideration received by a company for issue of shares that exceeds the face value of such shares, if the said consideration has been received from any person, by a company which fulfills the conditions specified in Para 4 of the notification issued before.

          Also, the files the declaration referred to in para 5 of the said notification of the Department for Promotion of Industry and Internal Trade (DPIIT).

        As per the notification G.S.R. 127(E) dated 19th February 2019, the Para 4 completely dedicated to the exemption of startups for the purpose of Section 56(2)(viib) of the Income Tax Act.

          As per the Para 4 of the notification, a Startup shall be eligible for notification under clause (ii) of the proviso to clause (viib) of sub-section (2) of section 56 of the Act and consequent exemption from the provisions of that clause, if it fulfils the following conditions:

1. it has been recognised by DPIIT under para 2(iii)(a) or as per any earlier notification on the subject
2. aggregate amount of paid up share capital and share premium of the startup after issue or proposed issue of share, if any, does not exceed, twenty five crore rupees:

     The current notification also certified that no person is being adversely affected by giving retrospective effect to this notification

          Recently, the CBDT has proposed changes to the Rule 11UA on Angel Tax and also proposed to  notify Excluded Entities. Angel taxes are levied on startup capital if it exceeds the company’s fair market value.

          Read more: CBDT proposes changes to Rule 11UA on Angel Tax, Also proposes to notify   Excluded Entities

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates