Angel Tax Abolished to Boost Indian Startup Ecosystem

Finance Minister Nirmala Sitharaman has proposed the abolition of the angel tax, aiming to drive more investments into startups and boost economic growth. The removal of this tax has been long-awaited by the industry and is expected to further support entrepreneurial spirit and innovation in India.

Finance Minister Nirmala Sitharaman has proposed the abolition of the angel tax, a move designed to bolster the Indian startup ecosystem, enhance the entrepreneurial spirit, and support innovation. This long-awaited proposal by the industry is expected to drive more investments into startups, which are key engines of economic growth, generating new jobs, ideas, products, and services.

DPIIT Secretary Rajesh Kumar Singh had called for the removal of the angel tax ahead of the Budget. The decision to abolish this tax has drawn rare praise from the opposition, with former Finance Minister P. Chidambaram stating, 'I am pleased to hear that the FM will abolish the Angel Tax. Congress has pleaded for this for many years and most recently included it in our manifesto.'

Angel tax refers to the income tax levied on funding raised by unlisted companies or startups when their valuation exceeds the company's fair market value. Introduced in 2012 by the UPA government to combat money laundering and bogus startups, the tax primarily impacted angel investors. While an exemption was issued in 2018 for investments under Rs 10 crore, startups still required approval from an inter-ministerial board and a certificate of valuation. Prashant Bothra, Founder of Fhero Accounting Solutions, emphasized the importance of abolishing this tax for better funding mechanisms and fueling growth ahead of the Budget.