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4) The recent measures by the government to moderate angel tax is a welcome measure. Critically analyze.(250 words)

Topic– Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

4) The recent measures by the government to moderate angel tax is a welcome measure. Critically analyze.(250 words)

The hindu

The hindu

Why this question

Conforming to the demands of the startup companies the Central government has decided to moderate the tax levied on angel investment in the country. In this context it is important to discuss the advantages as well as any limitations associated with the move.

Directive word

Critically analyze-  here we have to examine methodically the structure or nature of the topic by separating it into component parts, and present them as a whole in a summary. based on our discussion we have to form a concluding opinion on the issue.

Key demand of the question.

The question wants us to dig deep into the recent move of the government to moderate the angel tax and bring out its positive implications as well as negative implications/ insufficiencies and then form an opinion thereupon.

Structure of the answer

Introduction– write a few introductory lines about the  recent move of the government to moderate angel tax. E.g The Central govt has recently notified new rules pertaining to angel tax which, will exempt registered start-ups of a specified size from the tax and any scrutiny to do with its applicability.

Body-

  1. Discuss how it will be beneficial for startups and the economy in general. E.g
  • investments of up to ₹25 crore in an eligible company will be exempt from the angel tax.
  • In addition, investments made by a listed company of a networth of at least ₹100 crore or a turnover of at least ₹250 crore would also be exempt.
  • Investments made by non-residents will also be exempt.
  • This clarification would help in avoiding potentially significant tax challenges faced by startups and allow them to focus on their core activities.
  1. Discuss what are the limitations of the move. E.g
  • There was a request from the industry to include Category II Alternate Investment Funds as well in the exclusion list, which has unfortunately not been considered favourably.
  • The applicability of Section 68 of the I-T Act still remained and that they would take it up with the tax department.
  • Companies wishing to make use of the latest exemption, for instance, will first need to be registered with the government as start-ups.
  • To be classified as one, a company needs to attest to conditions such as that it has not invested in any land unrelated to the business, vehicles worth over ₹10 lakh, or jewellery. These requirements, while probably aimed to prevent money- laundering, can lead to considerable bureaucratic delays and rent-seeking etc.

Conclusion- based on your discussion, form a fair and a balanced conclusion on the given issue