• Startups

Hi. 
I had invested in a startup as an angel investor in India about 2.5 years back. I am going to exit that this month and it has resulted in a decent gain. 

I had given the company a cheque from my NRE account. (I live in London)

I have three questions here :
- Is there a provision by which I can receive The funds back in NRE account rather than NRO?
- is there a tax exemption on gains made through startup investments?
- if no blanket exemption, what is the method to save tax on this - invest in property? If so within how much time and where to keep the funds in the meanwhile 

Thanks
Asked 10 days ago in Capital Gains Tax from United Kingdom

Dear Sir,

 

Hope you are doing well !!

 

1. No, the money earned in India will be first transferred in NRO account.

On the other hand, the interest earned in NRO account and credit balances is subject to respective income tax bracket.

 

2 & 3. As per the recent income tax notification, angel investors with the minimum net worth of INR 2 crore or the average returned the income of more than INR 25 lakhs in the previous 3 financial years will be eligible for 100 % tax exemption on the investments that are made in the start-ups above the fair market value.

 

The Income Tax Department has exempted the Angel investors, subject to specific conditions that are laid down by the Indian Department of Industrial Policy and Promotion (DIPP), which has offered substantial relief to early-stage investors.

Payal Chhajed
CA, Mumbai
2853 Answers
39 Consultations

5.0 on 5.0

Dear Sir,

 

-For transfer of funds from NRO to NRE account, NRIs need to submit Form 15CA (online application form) and form 15CB (Chartered Accountant Application) to the bank branch.

 

-Transfer of funds from NRO to NRE account is subject to payment of applicable taxes. Only if the taxes are clear you can move funds.

 

-You can take the net worth certificate from CA as a proof.

Net worth certificate is a document that is compiled and certified usually by a Chartered Accountant taking into consideration all the assets and liabilities of the individual or Enterprise.

 

-Yes, it will treated as LTCG.

 

-Yes, you can claim the the tax exemption u/s 54F & 54EE.

 

-If you do not get a chance to invest in a profitable property immediately and still want to save your long-term gains from being taxed, you can invest your capital gains in CGDAS by approaching any public sector bank. The timeframe for the purchase or construction of the property remains unchanged in this case as well. But you can utilise this account momentarily so that you save your gains from being taxed and have more time to finalise a property for reinvestment.

 

It is required to deposit such unutilised capital gain in the capital gains account before furnishing return of income but not beyond due date for furnishing return of income.

 

Normally, the due date of filing Income Tax return is July 31 for the previous Financial Year. Under extraordinary circumstances, it can be extended by the Finance Ministry.

 

We may help you in entire procedure.

 

Payal Chhajed
CA, Mumbai
2853 Answers
39 Consultations

5.0 on 5.0

Hello,

 

1. No, it would be received in your NRO Account.

2. There is an exemption available from the angel tax for investors, but is subject to various conditions applicable to both the startup and the investor, which must be fulfilled for eligibility for the exemption.

3. Exemption would be u/s. 54F/54EC.

I hope this answer satisfies your requirement.

 

Regards,

CA Hunny Badlani

Badlani & Associates

Hunny Badlani
CA, Neemuch
794 Answers
1 Consultation

5.0 on 5.0

Yes, it qualifies as LTCG.

Timelimit for investment is 2 years for purchase or 3 years for construction of the new property. You can deposit the proceeds in the capital gain savings account, in case you wish to invest beyond this F.Y., till the due date for filing of return.

Hunny Badlani
CA, Neemuch
794 Answers
1 Consultation

5.0 on 5.0

Hi

 

There is no net worth based exemption on capital gains. That exemption is provided at the time of investment for differences in consideration and FMV of shares.

 

It would be a long term capital gain chargeable to tax @10% without indexation.

 

You may opt for capital gain exemption by investment in eligible startups or residential house property in India.

You may invest in a residential house property in India within 2 years of sale of such shares (3 years in case of construction).

If the sales consideration is not invested till the date of filing of return or due date of return filing, whichever is earlier, you need to deposit the amount in CGDS account.

Lakshita Bhandari
CA, Mumbai
3545 Answers
174 Consultations

5.0 on 5.0

In my opinion, since the investment has been made through the NRE account, the sale proceeds can be directly transferred to the NRE account since it is a repatriable deposit.

Further, a FEMA expert could guide you better on this.

Lakshita Bhandari
CA, Mumbai
3545 Answers
174 Consultations

5.0 on 5.0

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