Elimination of Angel Tax to uplift sentiment in the start up community

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Nearly 7,000 early-age startups may benefit from new angel tax norms: Report

The recently announced stimulus by the FM is a very welcome step and we think it will help uplift sentiment, especially in the start up community too along with other core sectors. Among the slew of relief measures, we definitely welcome the decision to scrap the Angel Tax for start-ups registered with the Department for Promotion of Industry and Internal Trade (DPIIT) which has come as a huge relief for the start-up ecosystem. Angel tax has been at the forefront of the concerns highlighted by the country’s start-up ecosystem as the fund raised by these companies came under the purview of taxation. The tax was paid by the startups on the funding received from investors. This had created unnecessary stress for both the entrepreneurs and the angel investors as till now, the Government has provided this exemption only for investment below a threshold and where only accredited investors were involved.

This move is likely to give a long-demanded angel tax breather to start-ups and exempt them from scrutiny. We also welcome simplification of the tax filing process, easier regulation on digital banking and digitization of transactions which will boost growth of the Indian start-up ecosystem. Additionally, the move to also set up a dedicated cell under a member of the Central Board of Direct Taxes to address the problems of the startups sounds promising as it will facilitate quick resolution.

The government has been proactive in addressing the concerns of startups and has taken a number of measures in the recent past in this direction. These steps shows government’s resolve towards ease of doing business in India and encourage entrepreneurship. The government also needs to make similar tax provisions for friends and families that are not categorized as angels and have backed startups that are not DPIIT registered.

By- Manas Mehrotra, Chairman, 315Work Avenue