Published 13:18 IST, July 23rd 2024
Budget 2024: Sitharaman announces abolishment of angel tax for all classes of startup investors
To attract foreign capital for the development needs, FM has proposed to reduce the corporate tax rate on foreign companies.
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Angel tax abolished: To bolster startup investments in the country, Finance Minister Nirmala Sitharaman has announced that angel tax will be abolished for all classes of investors in Budget 2024.
“First of all, 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 Finance Minister said in her Budget speech in the Parliament on Tuesday.
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Besides, to attract foreign capital for the development needs, the Finance Minister has proposed to reduce the corporate tax rate on foreign companies from 40 to 35 per cent.
Last year, changes to the angel tax provisions in the Union Budget raised concerns among foreign investors about startup investments in India. The Finance Bill, 2023, removed the exemption for money raised from foreign investors under the angel tax regime while maintaining the exemption for investments made by SEBI-registered alternative investment funds.
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The angel tax was introduced in 2012 as an anti-abuse measure to prevent money laundering and it allows the government to tax a startup's fundraising. This taxation used to be pressed if the valuation exceeded the fair market value of its shares, as determined by a merchant banker.
Over the years, startups and investors have expressed concerns about the provision, citing issues with tax authorities even in cases of legitimate investments. In response to persistent appeals from startups, the government granted an exemption in 2019 for DPIIT-registered startups. This exemption was not universal though as it applied only to those certified by the Inter-Ministerial Board (IMB), another government body.
(Source: Republicbiz)
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13:18 IST, July 23rd 2024