PARAGRAPH,WORDS AND MEANINGS

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PARAGRAPH,WORDS AND MEANINGS

Topic Of The Day:-“Half-Measures: New Angel Tax Rules For Start-Ups”

 

It Is Good The ‘Angel Tax’ Has Been Moderated, But Its Arbitrary Nature Remains Intact

After the uproar among start-up investors in the last few weeks, the Centre on Tuesday decided to ease the conditions under which investments in start-ups will be taxed by the government. According to the new rules, investments up to ₹25 crore in companies that are less than 10 years old and with a total turnover of less than ₹100 crore will be exempted from the new angel tax. Further, investments made by listed companies with a net worth of at least ₹100 crore or a total turnover of at least ₹250 crore will be fully exempt from the tax; so will investments made by non-resident Indians. When it was first proposed by the Centre in 2012, the angel tax was justified as an emergency measure to prevent the laundering of illegal wealth by means of investments in the shares of unlisted private companies at extraordinary valuations. But the adverse effect that it has had on investor confidence has forced the government to ease the stringent rules. The easing of the outdated angel tax rules will definitely make life easier for start-ups, which are in desperate need for capital to fund their growth and other business requirements. Further, since the new rules are set to be applied retrospectively, many young companies that have received notices from the Income Tax Department in the last few years will be relieved by the latest tweak in the rules.

There are, however, a few other issues with the new rules that could still cause unnecessary headaches to young start-ups. 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. Also, the new rules for the angel tax, though less stringent than before, can cause the same old problem of arbitrary tax demands for companies that do not fall under the defined category of start-ups. The taxes to be paid are still supposed to be calculated by the authorities based on how much the sale price of a company’s unlisted share exceeds its fair market value. It is impossible to know the market value, let alone the fair market value, of shares that are not openly traded in the marketplace. So tax authorities with ulterior motives will still possess enough leeway to harass start-ups with unreasonable tax demands. Unless the government can address the arbitrary nature of the angel tax, the damage to investor confidence may remain.

WORDS AND MEANINGS:-

1) exempted

Meaning : free (a person or organization) from an obligation or liability imposed on others(v).

Synonyms : immune

Antonyms : hindered

Example : “they were exempted from paying the tax”

2) proposed

Meaning : put forward (a plan or suggestion) for consideration by others(v).

Synonyms : expected

Example : “he proposed a new nine-point peace plan”

3) laundering

Meaning : wash and iron (clothes or linen)(v).

Synonyms : cleanse

Antonyms : dirty

Example : “he wasn’t used to laundering his own bed linen”

4) desperate

Meaning : feeling or showing a hopeless sense that a situation is so bad as to be impossible to deal with(adj).

Synonyms : bold

Antonyms : afraid

Example :”a desperate sadness enveloped Ruth”

5) retrospectively

Meaning : with consideration of past events or situations.

Example : “medical records were retrospectively reviewed on 120 patients”

6) instance

Meaning : an example or single occurrence of something(n).

Synonyms : occasion

Example : “a serious instance of corruption”

7) attest

Meaning : provide or serve as clear evidence of(v).

Synonyms : demonstrate

Antonyms : conceal

Example : “his status is attested by his becoming an alderman”

8) bureaucratic

Meaning : relating to a system of government in which most of the important decisions are taken by state officials rather than by elected representatives(adj).

Synonyms : economical

Example : “well-established bureaucratic procedures”

9) stringent

Meaning : (of regulations, requirements, or conditions) strict, precise, and exacting.

Synonyms : binding

Antonyms : amenable

Example : “stringent guidelines on air pollution”

10) ulterior

Meaning : existing beyond what is obvious or admitted; intentionally hidden(adj).

Synonyms : buried

Antonyms : expressed

Example : “could there be an ulterior motive behind his request?”