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In a significant move to bolster the startup ecosystem, Union Finance Minister Nirmala Sitharaman proposes the abolition of the angel tax for all investors during the Budget 2024-25 presentation in Lok Sabha.
This tax, introduced in 2012, aimed to curb the misuse of unaccounted money through inflated share valuations in closely held companies. However, venture capitalists and industry experts have long called for its removal to foster a more supportive environment for startups in India.
Alongside the abolition of the angel tax, Sitharaman proposed raising the capital gains exemption limit on certain financial assets to Rs 1.25 lakh per year for the middle and upper-middle class.
Prior to the budget, the Department for Promotion of Industry and Internal Trade (DPIIT) had recommended the removal of the angel tax, following consultations with the startup community. DPIIT Secretary Rajesh Singh mentioned that while their recommendations were submitted to the finance ministry, the final decision rested with the government.
The angel tax, levied at a rate above 30 per cent, applied to capital raised by unlisted companies if the value of the shares issued exceeded their fair market value. Industry voices have criticised it as a deterrent to India's otherwise thriving startup landscape.
