iNDICA NEWS BUREAU-
In a major relief for the start-up ecosystem in India, the government on Monday announced the abolition of Angel Tax to further boost local talent and innovation.
The industry had sought rationalization of Angel Tax by removing Section 56(2)(viib) in order to further nurture innovation among start-ups, saying scrapping this section would “greatly aid in capital formation” for the sector.
Promoting Investment, Employment & Social Security
🔸 Angel tax for all classes of investors to be abolished, to bolster Indian start-up ecosystem
🔸 Corporate tax rate on foreign companies to be reduced to 35%
🔸 Simpler tax regime for foreign shipping companies operating… pic.twitter.com/1Uf29XQL7B
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Under Section 56(2) (viib) of the Income Tax Act, to become eligible for Angel Tax exemption, a start-up must meet certain conditions which the industry claims are cumbersome and come in the way of attracting more investments.
Raj Ramachandran, Partner, JSA Advocates & Solicitors, said the much-anticipated update in the Budget 2024 is the abolition of Angel Tax.
“Since introduction, it has created discomfort and confusion for all players alike, and is certainly one change that will be a welcome one for all,” he said, as quoted by IANS.
More than 114,000 start-ups in India have created over 1.2 million jobs so far, the Finance Ministry said in its latest review of the Indian economy.
The cumulative funding for more than 31,000 tech startups has exceeded $70 billion (from 2019 to 2023), according to a recent report by Nasscom in collaboration with Zinnov.
As many as 2,975 government-recognized start-ups have been granted Income Tax exemptions so far, the Department for Promotion of Industry and Internal Trade (DPIIT) said in February.
In September last year, the government notified new Angel Tax rules that comprise the mechanism to evaluate the shares issued by unlisted start-ups to investors.
Start-ups registered with the DPIIT were exempted from the new norms. The government highlighted that the exemption will benefit over 80,000 start-ups.
