Union Finance Minister Nirmala Sitharaman in her Budget speech on Tuesday announced that angel tax will be abolished for all investors.
The announcement was made during the presentation of Budget 2024-25 in Lok Sabha.
The Angel tax was introduced in 2012, intended to curb the use of unaccounted money through the subscription of shares in closely held companies at inflated valuations.
It’s a provision under Section 56(2)(viib) of the Income Tax Act, 1961. It essentially treats the investment received by startups from external investors as “income from other sources” and taxes it at a rate of 30%.
Venture capitalists (VCs) and investors demanded the angel tax to be removed to promote a more conducive environment for startups in India.
Finance Minister Nirmala Sitharaman in her budget speech said, “To bolster the Indian start-up eco-system, boost the entrepreneurial spirit and support innovation, I propose to abolish the so-called angel tax for all classes of investors.”
The removal of angel tax is expected to foster a supportive and conducive environment for the startup ecosystem and will help India become a global innovation hub.
“This is a move in the right direction. Angel Tax litigation has been an area that investors and founders have ended up spending alot of time on. Abolishing Angel Tax will allow increased flow of investments in Companies in India, especially from non – residents,” said Mitul Mehta. CFO, Blume Ventures.
(This is a developing story, more details will be added.)
