Angel tax abolished for Indian Startups in Union Budget 2024
The angel tax was abolished for Startups in Indian scenario as the Union Minister Nirmala Sitharaman presented the Union Budget 2024, today and this comes with great relief for the Indian start up ecosystem.
The Union Minister Nirmala Sitharaman in her speech said “ first of all, to bolster the Indian start up ecosystem, boost the entrepreneurial spirit and support innovation,I propose to abolish the so called ‘angel tax’ for all classes of investors.
Defining Angel tax:
Angel tax, an income tax at the rate of 30.6%, is levied when an unlisted company issue shares to an investor at a price higher than its fair market value agreed to by both parties.
The industry says taxes levied on the difference between issue price of unlisted securities and its fair market value has hurt funding as investors fund startups based on their future potential and it may be incorrect to see it as a sign of money laundering.
Investors in start-up in India are mainly overseas based and Non-resident inventors are biggest sources of funding in the country and some of the most successful Indian startups had been backed by investors based in the US and China.
There was call from various quarters with the start-up ecosystem to abolish the tax and Department of promotion of Industry and Internal Trade (DPIIT) Secretary Rajesh Kr Singh said.
Along with abolishment of angel tax, the definition of “eligible start-up” under the scheme of Start Up India scheme to include entities incorporated between April 1,2016, and 31’s March 2025.
Currently, the DPIIT recognises 1,17,000 registered startups under the Startup India scheme. To be eligible for incentives, a startup’s turnover should be less than Rs 100 crore in any of the previous financial years.
