Venture capitalists and industry experts have welcomed the removal of angel tax, which is an important step towards accelerating the growth of startups in India. Finance Minister Nirmala Sitharaman during the Budget presentation for 2024-25 announced that angel tax will be abolished for all investors.
The angel tax, introduced in 2012 to prevent money laundering, was levied on the funding that startups received from angel investors when the investment amount was higher than the fair market value of the startup’s shares. This tax often hindered investment and innovation, as the difference between the amount received and the market value was considered taxable income.
With the removal of angel tax, the startup ecosystem is expected to grow substantially, thereby attracting more investments and creating a more supportive environment for innovation and entrepreneurship. This landmark decision will catalyse the growth of startups, encourage entrepreneurial efforts and create a more vibrant and dynamic business landscape in India.
