News

Nirmala Sitharaman Scraps Angel Tax Major Boost For Startups

Submitted by admin on July 23rd, 2024

The angel tax, cleared by the union cabinet in a previous sitting of the current Lok Sabha, India’s lower house of Parliament that Sitharaman was a part of before being elevated to the Rajya Sabha was declared null and void.

The Government as part of a plan to encourage more startup investments in the country announced on July 23, that Finance Minister Nirmala Sitharaman said that angel tax will be done away for all classes of investors in Budget 2024.

‘The actuality to scrap Angel Tax for all classes of investors is a big revolution It is imperative for startups to stay in India and grow from here,’ Pai said, adding ‘It is a leap forward for Indian startups yes, it is a turning point in the Indian startup narrative.’

The so-called Angel Tax – a tax on capital is against capital formation and was long used to harass startups and investors As for the disclosure of unlisted securities in the tax returns Section 68, given the mandatory de-matting of securities, this is the whole for which Angel Tax was created, has been plugged The Centre has fully unbundled Angel tax, it took 12 years, but the Startup Industry can heave a sigh of relief that.

The then amendment to the angel tax provision in the Union Budget stirred controversy over startup investment across the county by foreigners in the previous year. This is because the exemption granted to money raised from foreign investors under the so-called angel tax was removed in the Finance Bill, of 2023. However, the inference for those made by the SEBI–registered AIF still prevailed Further, the changes affected the general entities and did not specifically target those that were engaged in funding agriculture and infrastructural projects.

The Indian angel tax was initially implemented in 2012 to counteract abuse in the form of money laundering. It declared that the funding of a startup could be taxed at any time if the funding round occurred at a valuation higher than the fair value of shares – as decided by a merchant banker.

Over the years, startups and investors have raised an alarm about being troubled by the taxmen due to the provision even in the case of genuine investments.

After years of startups crying themselves hoarse, the government conceded in 2019 that DPIIT-registered start-ups would be exempted from the provision. However the fine print showed that it was not a blanket exemption for all such start-ups. It applied only to those certified by another government body called the Inter-Ministerial Board (IMB).