Angel tax relief to startups

Angel Tax refers to a money pool created by high net worth individuals or companies, generally called as angel investors, for investing in business startups. Various startups founder claimed that they received notice under section 56(2) (vii) (b) of Income Tax Act (“Act”) from Income Tax Department (“Department”) to pay taxes on angel funds raised by them. Entrepreneurs have raised their concern on such tax notices. However, India is likely to soon announce the concessions to shield startups from the angel taxes. The changes will be made to the conditions specified under section 56(2) (vii) (b) of the Act to remove any ambiguity and allow exemption for past as well as proposed investments that do not exceed INR 10 crores.

Meaning of angel tax
With an intention to promote entrepreneurship in India, government has loosened the condition for startups and investors to shield them from what has been called angel tax. Angel tax is a term referred to the income tax payable on capital raised by unlisted companies via issue of shares where the share price is seen in excess of the fair market values of the share sold. The excess realization is treated as income and taxed accordingly. This tax was introduced in the year 2012 Union Budget by the finance minister Pranab Mukherjee to seize and desist money laundering practices.

Relaxation on Angel Tax
In the latest development, the government has redefined the meaning of startups. The relaxations are made per the vision to boost the startup culture in India. The new rules are expected to catalyse business enterprises by exempting angel tax on the funds that they have received from the investors.
This move has opened paths for large conglomerates and alternative investment funds to invest in startups without getting taxed on valuations. The new bill will also allow startups to avail tax-free holiday up to three years during the 10-year period and the investment limit has been raised from 10 crores to Rs 25 crores for availing tax exemption. Now, with the higher exemption limit, the majority of the angel investment would wind up qualified for exclusion from the tax.

Current scenario
CBDT will soon be set for processing requests from startups and angel investors for exemption to speed up the process. DIPP will meet stakeholders to seek feedback in the first week of February 2019 to discuss all policy and implementation issues. New framework regarding the same will be announced on 16 February. Helping hand that is CBDT will set up cell to process exemptions applications. Latest notification issued by DIPP lays down a process for startups to obtain an exemption from angel tax.

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E-COMMERCE POLICY -CHANGES AND EFFEC

What is e – commerce ?
E-commerce means buying and selling of goods and services including digital products over digital & electronic network.

What is E- Commerce Policy?
Policy of Foreign Direct Investment (FDI) in E-commerce sector as provided by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India in Para 5.2.15.2 of Consolidated Policy Circular 2017.(https://dipp.gov.in/sites/default/files/CFPC_2017_FINAL_RELEASE D_28.8.17.pdf)

What is e –commerce entity?




CHANGES IN E-COMMERCE POLICY







EARLIER(Consolidated FDI Policy Circular of 2017 )
Cashback and discriminating prices:- No such Clause

Now [As per Press Note No.- 2(2018 series) Applicable w.e.f.-1st February,2019]
Provision of services to any vendor or such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory. Cashback provided by group Companies of market place entity to buyer shall be fair and nondiscriminatory.

Essence
Low cashback and approximately equal prices for products. The policy prohibits ecommerce platforms from giving any preferential treatment to any supplier.

Effects of changes in Policy
Adverse Effects
1. Deep discounts disappears: Big online sales may disappear and one of the main method of attracting customers i.e. deep discounts on Flipkart or Amazon may not be usable now.
2. Buyers inconvenience :- Customers will now have to check other shopping websites and even may have to Switch to real shops. Now buyers may have to visit the traditional street side shop to get better prices and discounts.
3. End of Cashbacks:-the buyers whose buying decisions get affected on the basis of cashback available would have great impact as the guidelines imply the end of cashbacks.
4. End of exclusive deals:- New policy clearly prohibits E –commerce entity to force any vendor to sell products only on its platform. This clearly means end of ‘exclusive/prime deals’ which are generally run by Flipkart and Amazon India.
5. Lack of choice:-The new policy prohibits entities from selling its products on e-commerce platform, in which the e-commerce platform has an equity investment.This implies choice would be reduced due to this provision.

Gainers from New E-commerce policy:-
Retail stores: New guidelines restricts discounts and cashbacks will help Retail stores i.e.brick-andmortar retailer retain customers.

Small ecommerce companies:-To compete with giants like Amazon/Flipkart, smaller ecommerce companies don’t have enough money .These Small e –commerce Companies will stand to gain from the new norms .

Small sellers:-an ecommerce platform which provide any service– logistics, warehousing or easy financing options – will now have to offer to all sellers and no preference would be given to any particular seller.


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MSME(Micro ,Small & Medium) Enterprises Registration Process

Registration Process

• The SME (Small and Medium Scale Enterprises) owner needs to fill a one-page form(UDHYOG ADHAAR MEMORANDUM) that
  he can do either online or offline. For online registration, the applicant should visit the official website: http://www.msme.gov.in
• In this form, the MSME has to self-certify its existence, details of the business activity, bank account, ownership and
  employment details and other information
• no registration fees are required to be paid for this process
• After filling the details and uploading the same, the registration number would be generated and the same would be mailed
  to the email address given in the UAM(UDHYOG ADHAAR MEMORANDUM) which should contain unique UAN (Udyog Aadhaar
  Number)

Benefits of MSME Registratioin
Registration is NOT yet made mandatory by the Governmentbutitis beneficial to get one’s business registered under this because it provides a lot of benefits in terms of taxation , setting up the business , credit facilities, loans etc.

Following are the benefits of Registration of MSME:-
• FINANCIALS BENEFITS :
1. After registering MSME, the applicant will receive the benefits of all the government schemes such as an easy
loan, loan without guarantee, loans with subsidized rates of interest etc.
2. The applicant will receive financial support for participating in foreign expos to showcase their products
3. MSMEs there are no requirements of security money, earnest money, turnover requirement etc in the
government tenders
4. A hefty 50% subsidy on Patent registration

• STATUTORY SUPPORT :
http://1.As per section 15 of MSME Act,2006 Buyer from Micro & Small Enterprises(MSE) shall make payment within the
period agreed upon(not more than45 days).Also as per section 16,if buyer fails to make payment to MSE as required
in section 15 ,buyer shall be liable to pay compound interest with monthly rest to supplier from the date agreed
upon at 3 Times of bank rate notified by the The RBI.
2.RESERVATION POLICY: Reservation of products for exclusive manufacture in the small scale sector

• TAXATION BENEFITS :
1.Excise Exemption Scheme(Depending on business)
2. Presumptive taxation scheme under section 44AD of the Income Tax Act
3. A small-scale unit established in a backward area, under Section 80-HH, is allowed a deduction of 20 per cent on
its profits and gains subject to some conditions.

Some of the MSME schemes launched by the Government are:
• Performance and Credit Rating Scheme
The purpose of rating scheme is to provide a trusted third party opinion on the capabilities and creditworthiness of the micro & small enterprises (MSEs ) so as to create awareness amongst MSEs about the strengths and weakness of the irexisting operations. Rating fee payable by the MSEs is
subsidized by the Government to the extent of 75% subject to maximum ceiling of Rs. 40000/- based on the turn over of the unit.

• Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT SME)
Ministry of Micro, Small and Medium Enterprises and Small Industries Development Bank of India (SIDBI) jointly established a
Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in order to implement Credit Guarantee
Scheme for Micro and Small Enterprises. The corpus of CGTMSE is contributed by Government of India and SIDBI. 75% of the
loan amount to the bank is guaranteed by the Trust Fund. Collateral free loan up to a limit of ₹ 100 lakh is available for
individual MSE on payment of guarantee fee to bank by the MSE.

• Credit Linked Capital Subsidy for Technology Upgradation (CLCSS)
CLCSS provides 15% subsidy for additional investment up to ₹ 1 cr for technology upgradation by MSEs. Technology
upgradation would ordinarily mean induction of state-of-the-art or near state-of-the- art technology. In the varying mosaic
of technology covering more than 7,500 products in the Indian small scale sector.

• Export Market Promotion (EMP)
Coir Board is implementing Export Market Promotion with a view to improve the export performance of Indian Coir Sector
through various export market promotion activities such as sponsoring delegations; participation in seminars and
conferences; organising participation in international fairs; undertaking generic publicity abroad; extending financial
assistance to Micro, Small and Medium Enterprises and Exporters; presenting Coir Industry Awards on an annual basis to
recognize the outstanding performance in the areas of export; domestic trade; R&D and functioning of units and societies.

• Bank Credit Facilitation-Schemes of National Small Industries Corporation (NSIC)
To meet the credit requirements of MSME units, NSIC has entered into a Memorandum of Understanding with various
Nationalized and Private Sector Banks. Through syndication with these banks, NSIC facilitates MSME in accessing credit
support (fund based or non-fund based limits) from the banks. NSIC assists MSMEs in completion of the documentation for
submitting the proposals to the banks and also does the follow up with the banks. These handholding support are provided
by NSIC without any cost to the MSMEs

• Statutory Compliance requirement After Registering as MSME:-
There is no such separate Statutory compliance to be fulfilled by Enterprises Registering as MSME.
• Renewal of Certificate for registering as MSME:-
There is no renewal requirement of certificate received for registering as MSME .

MSME registration in India