DPIIT requests Union Finance Ministry to abolish Angel Tax on Startups

By Team Startupcity  |  Friday, 05 July 2024, 08:51 IST

DPIIT requests Union Finance Ministry to abolish Angel Tax on Startups
The suggestion for the elimination of Angel tax in view of requests by the Indian Startups has been made, yet an ultimate conclusion rests with the Union Finance Ministry, said DPIIT Secretary Rajesh Kumar Singh in a site to the media.
The department's proposal also comes after the CII - Confederation of Indian Industry called for the elimination of the angel tax in its budget recommendations, stating that it "will greatly aid in capital formation." 
The sector’s clatter for the rejecting of the tax levy has been well established and one that has acquired in enthusiasm in the midst of the continuous funding slump with interests into startups dropping to a 5-year-low in 2023. 
Venture capitalists also believe that eliminating the Angel Tax will encourage innovation in the world's third-largest startup economy and accelerate the trend of Indian startups moving their headquarters back to India. 
Initially presented in 2012, Area 56(2) (viib) of the Income Tax Act — prevalently known as Angel Tax — is an anti-abusive arrangement to forestall acts, for example, illegal tax avoidance and round-tripping. 
The standard is applied when a firmly held organization, for example, a startup issues shares (counting inclination shares) at a valuation higher than the fair market evaluation. 
The authorities of tax treat the overabundance sum got by a startup as pay from different sources and toll a duty of around 30% likewise. 
Investors have claimed, in opposition to the tax, that the tax notices to their portfolio companies hinder their "ease of doing business" and that they typically invest at a higher valuation, taking into account the potential of a startup in the future. 
Certainly, regardless of its conversational name, Angel Tax is demanded on startups, not its financial backers.    
 

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