Government Scraps Angel Tax to Propel Startup Growth

The government has removed the angel tax for all investor classes to promote startups. Angel tax is levied on funding that exceeds a startup's fair market value. The move aims to boost the entrepreneurial ecosystem. This tax previously applied to local investors but was recently extended to foreign investments.

In a significant boost for the nation's startup ecosystem, the government has announced the removal of the contentious angel tax for all classes of investors, a move aimed at spurring the growth of budding entrepreneurs.

The angel tax, an income tax imposed on funding raised by unlisted companies if their valuation exceeds fair market value, had long been a thorn in the side of startups. Previously, this tax applied exclusively to local investors, but the 2023-24 budget expanded its scope to include foreign investments.

The decision comes after recommendations from the Department for Promotion of Industry and Internal Trade (DPIIT) and is expected to offer significant relief to over 1.17 lakh registered startups under the government's Startup India initiative. Industry experts have lauded the move, seeing it as a timely step to boost long-term strategic investments and risk-capital essential for innovation.