“I welcome only one provision, which is abolishing of tax on angel investors. I had recommended it to Arun Jaitley more than 5 years ago,” the Congress MP Shashi Tharoor said.
Giving a big relief to startups, the government in its Budget 2024 announced removal of angel tax for all classes of investors to promote the growth of budding entrepreneurs of the country.
Angel tax is the income tax that the government imposes on funding raised by unlisted companies, or startups, if their valuation exceeds the company’s fair market value.
“To bolster the Indian startup eco-system, boost the entrepreneurial spirit and support innovation, I propose to abolish the so-called angel tax for all classes of investors,” FM Sitharaman said.
What Is Angel Tax?
This contentious tax typically impacts angel investment the most and therefore is called the angel tax.
It was introduced in 2012 by the UPA government in order to detect money laundering practices and catch bogus startups.
In 2018, the government issued a notification to give exemption to startups under the relevant section of the Income Tax Act, in cases where the total investment including funding from angel investors did not exceed Rs 10 crore.
Ahead of the Union Budget, the Department for Promotion of Industry and Internal Trade (DPIIT) has recommended removal of this levy on startups.
Read More: Best Fixed Deposit interest rates for Senior Citizens ahead of Budget 2024
In September last year, the Income Tax Department notified new angel tax rules that comprise a mechanism to evaluate the shares issued by unlisted startups to investors.
While previously the angel tax — a tax levied on capital received on the sale of shares of a startup above the fair market value — applied only to local investors, the Budget for the 2023-24 fiscal year (April 2023 to March 2024) widened its ambit to include foreign investments.
Over 1.17 lakh startups are registered with the government. They are eligible for availing of incentives under the government’s Startup India initiative.
Read More: Paytm partners with Axis Bank to provide payment solutions for merchants
Experts On Revocation Of Angel Tax
Commenting on the announcement, Deloitte India Partner Sumit Singhania said it is a positive move as it would help reset not only the tax cost matrix for investors in startup, but for foreign strategic investors as well.
“It also puts out a progressive view of tax policy making by the government. Since this levy has stung for more than a decade since it was introduced in 2012, withdrawal of angel tax entirely means a timely course correction as the government rolls out red carpet for long term strategic investment as well more risk-capital to promote innovation and R&D,” he said.
Lokesh Shah, Partner, IndusLaw, termed it as a major announcement.
“This is a huge relief for Indian companies, specifically startups. A delight for investors and private equities/venture funds supporting Indian companies,” Shah said.
Read More: Budget 2024: PM Modi Addresses Nation Post FM Speech; Praises Measures On TDS And Ease Of Credit
Opposition Welcomes Abolition Of Angel Tax
Former Finance Minister P Chidambaram said ” was pleased to hear that the FM will abolish the Angel Tax. Congress has pleaded for the abolition for many years and most recently in the Congress Manifesto on page 31.”
Congress MP Shashi Tharoor welcomed the budget proposal to abolish the angel tax and claimed that he recommended the same to former Finance Minister Arun Jaitley five years ago.
“It is an underwhelming budget. I didn’t hear anything about the key issues facing the common man. There is no mention of MNREGA, and insufficient mention of steps taken to improve the income of a common person,” Tharoor told ANI on Tuesday.
For more news like this visit Officenewz.com
