Angel Tax Abolishment: Investments Should Not Get Taxed, says DPIIT Secy

New Delhi, Jul 24 (KNN) In a significant move to strengthen India's start-up ecosystem, the government has announced the removal of the angel tax for all classes of investors.

This decision, revealed on July 23, is expected to attract foreign investments, promote innovation, and reduce disputes and litigation in the start-up sector.

Rajesh Kumar Singh, Secretary, Department for Promotion of Industry and Internal Trade (DPIIT), explained that the angel tax was a long-standing issue as it essentially taxed investments rather than income. "Investments should not get taxed, that is the basic idea," Singh stated in an interview with PTI.

The angel tax levied a 30 per cent tax on funding raised by unlisted companies if their valuation exceeded the fair market value.

This provision, introduced in 2012 as an anti-abuse measure, has been a point of contention for start-ups and investors alike.

According to Singh, the tax was forcing start-ups to seek foreign investors and domicile themselves outside India.

He argued that while the tax aimed to prevent money laundering, it was burdening genuine innovators who were trying to sell ideas and secure investments.

Commerce and Industry Minister Piyush Goyal emphasised that this decision will help attract investments in Indian start-ups and promote the growth of budding entrepreneurs.

The move is expected to particularly benefit emerging sectors such as deep tech, artificial intelligence, and clean energy, which require substantial capital at early stages.

The government had previously made amendments to make the tax regime more conducive for investors and start-ups.

However, concerns persisted about its potential adverse impact on the industry and inbound investments.

As of now, approximately 1.44 lakh start-ups are recognised by the DPIIT.

The removal of the angel tax is anticipated to infuse confidence into India's investor community and increase the number of active investors in the country, especially for early-stage companies.

This policy change aligns with the government's efforts to enhance ease of doing business and solidify India's position as the world's third-largest start-up ecosystem.

(KNN Bureau)