New Delhi: Funds received by startups from accredited investors may be exempted from angel tax subject to complying with certain net worth criteria, an official said. This provision is considered by the government as part of an exercise to define ‘accredited investors’ with a view to increase investment flow in startups. The Department for Promotion of Industry and Internal Trade (DPIIT) is working on the definition, which would be submitted to the finance ministry for approval. Also Read – Commercial vehicle sales to remain subdued in current fiscal: Icra”Accredited or genuine investors can invest any amount but we will make some criteria for that. It should be liberal enough so that all such people can come under its purview. But it should not be over liberal and extra-stringent,” the official said. “How much a genuine investor is investing per year would depend on his/her net worth. For example, if you invest Rs 2 crore, then the net worth should be 10 times of that. There should be a linkage between investments and investors’ net worth and certain income should be there,” the official added. Also Read – Ashok Leyland stock tanks over 5 pc as co plans to suspend production for up to 15 daysThese accredited investors, which can include trusts, individuals, family member of a startup and unlisted companies, may get exemption from angel tax under Section 56(2)(viib) of Income Tax Act, 1961, beyond the Rs 25 crore limit. Currently, the government allows startups to avail full angel tax concession on investments up to Rs 25 crore. Section 56(2) of the I-T Act provides that the amount raised by a startup in excess of its fair market value would be deemed as income from other sources and would be taxed at 30 per cent. Touted as an anti-abuse measure, this section was introduced in 2012. It is dubbed as angel tax due to its impact on investments made by angel investors in startup ventures. An angel investor is the one who puts funds in a startup when it is taking steps to establish itself in the competitive market. Normally, about 300-400 startups get angel funding in a year. Their investment in a unit ranges between Rs 15 lakh to Rs 4 crore. The department is also suggesting to exempt funds of alternate investment funds (AIFs) category 1 and 2 in startups to be completely exempted from this section. Currently, only certain areas of AIF category 1 are exempted. DPIIT has proposed various measures such as tax incentives to promote budding entrepreneurs as part of the ‘Startup India Vision 2024’. The vision document aims at facilitating setting up of 50,000 new startups in the country by 2024 and creating 20 lakh direct and indirect employment opportunities. In the document, it has suggested setting up of 500 new incubators and accelerators by 2024; 100 innovation zones in urban local bodies; deployment of entire corpus of Rs 10,000 crore Fund of Funds; and expanding CSR funding to incubators. Startup India is a flagship initiative of the government launched in January 2016. The programme intends to build a strong ecosystem for the growth of startup businesses, to drive sustainable economic growth and generate employment opportunities. So far, as many as 17,984 startups have been recognised by the department.