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Great news for startups as India moves to abolish angel tax

EntrackrEntrackr · 1y ago
Great news for startups as India moves to abolish angel tax
Medial

Presenting the Union Budget 2024-25, Finance Minister Nirmala Sitharaman on Tuesday proposed to abolish the angel tax, meeting one of the longstanding demands of Indian startups. The angel tax, widely considered detrimental to the startup ecosystem, mandated around a 30% tax on investments from external investors, also known as angel investors. Through its budget for 2023-24, the government had proposed to include foreign investment under the ambit of the angel tax. The government had said the excess premium would be considered as “income from sources” and face taxes up to over 30%. Though it had exempted Startups registered with the Department of Promotion of Industry and Internal Trade (DPIIT). “To bolster the India startup ecosystem, to boost entrepreneurial spirit and support innovation I propose abolishing angel tax for all classes of investors,” Sitharaman said while presenting the Budget 2024-25. Earlier this month, the buzz around the angel tax picked up momentum with the Commerce Ministry recommending the abolishment of the 12-year-old law. Unsurprisingly, the startup community, including entrepreneurs, investors, and VCs, have welcomed the proposal to abolish the tax. “Finally, it’s Good to see #angeltax abolished .#BudgetSession . Long overdue. So much harassment, headache , unwanted anguish for startup founders , angel investors. Very welcome . One less Tax terrorism avenue,” said K Ganesh, a serial entrepreneur who promoted and invested in several unicorns and startups via growthStory. India implemented angel tax in 2012 to help tackle unaccounted money raised through capital received from resident investors in a closely held company in an excess of the fair market value. Besides providing huge relief to investors, the move is likely to get interest from new investors as the taxation has now been eased out. “This will give a fillip to early-stage startup investment in the country. With removal of angel tax, entrepreneurs will be able to attract money from new asset classes, majorly residing in smaller cities,” said one of the prolific angel investors who also runs a micro-VC firm. Titan Capital co-founder and angel investor Kunal Bahl, All In Capital founder Kushal Bhagia, Capital Mind founder Deepak Shenoy and former Finance Minister P Chidambaram also took to X to express support for the removal of angel tax.

Angel tax was on investments, such inflows should not be taxed: DPIIT secretary on removal of levy

Economic TimesEconomic Times · 1y ago
Angel tax was on investments, such inflows should not be taxed: DPIIT secretary on removal of levy
Medial

The removal of the angel tax for startups has been a long-standing issue, as the tax on foreign investments was seen as a burden on the country's startup ecosystem. The decision to abolish the tax aims to attract more foreign investments, promote innovation, and ease the process of doing business in the country. This move will also reduce disputes and litigation and provide tax certainty and policy stability. The tax was seen as hindering genuine innovators and pushing them to seek investments abroad. With the removal of the tax, startups can now raise funds more easily, especially in emerging sectors such as deeptech, artificial intelligence, and clean energy.

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