• UGI USER
  • Jul 24, 2024
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ANGEL TAX ABOLISHED FOR FOREIGN INVESTMENTS IN START-UPS

Why in the news?

  • Finance Minister Nirmala Sitharaman announced the removal of the angel tax on foreign investments in start-ups.
  • The measure aims to bolster the Indian start-up ecosystem, boost entrepreneurial spirit, and support innovation.
source:researchgate

About Angel Tax:

  • Angel Tax: Tax on excess capital raised by unlisted companies above fair market value.
  • Introduced: Section 56(2)(vii)(b) of the Income Tax Act, 2012.
  • Purpose: Prevents use of unaccounted money through overvalued share subscriptions.
  • 2023 Amendment: Includes foreign investors; excess share price over fair market value is taxable.
  • Example: If fair market value is Rs 10 and shares are sold at Rs 20, the Rs 10 excess is taxable.

Budget 2023-24 Changes:

  • Angel Tax extended to foreign investors, except for government-recognized startups.
  • Previously applied only to resident investors.
Key points:the Income Tax Act

  • Definition: Income tax is paid based on income (and profit for companies).
  • Purpose: Funds public services, infrastructure, defence, and subsidies.
  • Regulation: Governed by the Income Tax Act, enacted in 1961.
  • Scope: Covers levying, administering, collecting, and recovering taxes.

Associated Article:

https://universalinstitutions.com/dpiit-supports-industrys-call-to-remove-angel-tax/