In a significant move aimed at attracting more investors to India, the Budget 2024-25 has removed the controversial angel tax. This announcement was made by Commerce and Industry Minister Piyush Goyal during a post-budget interaction with industry leaders in Mumbai.
Angel Tax Abolished to Enhance Investment Climate
Minister Piyush Goyal emphasized the positive impact this change will have on India’s investment landscape. “The Budget 2024-25 has removed the angel tax and through it, we will be able to attract investors into the country,” Goyal stated. The removal of this tax is expected to provide a much-needed boost to startups and emerging businesses, which have often faced challenges in securing funding due to the previously applicable tax on investments above fair market value.
What is the Angel Tax?
The angel tax was introduced in 2012 to curb money laundering activities. It was levied on the premium received by a privately held company over and above the fair market value of shares sold to an investor. This tax, however, had been a point of contention among startups and investors, as it was often seen as a deterrent to investment. With the removal of this tax, the government aims to simplify the tax regime and remove impediments that hinder the growth of startups and the overall entrepreneurial ecosystem.
Encouraging Startup Ecosystem
The abolition of the angel tax is seen as a strategic move to foster a more vibrant and supportive environment for startups. By removing this financial burden, the government aims to encourage more domestic and international investors to fund innovative ventures in India. This step aligns with the broader goal of making India a global hub for startups and entrepreneurship.
Industry Reactions
The industry has welcomed this decision with open arms. NASSCOM President, Debjani Ghosh, remarked, “The removal of the angel tax is a landmark decision that will accelerate the growth of the startup ecosystem in India. It reflects the government’s understanding of the needs of startups and its commitment to fostering innovation.”
Similarly, Deep Kalra, founder of MakeMyTrip, expressed his optimism, “This is a game-changer for the startup community. By removing the angel tax, the government has addressed one of the biggest pain points for investors and startups alike. We can now expect a surge in investments, which will drive innovation and job creation.
