India scraps ‘angel tax’ in boost for startups

Date:

Share post:


India’s federal government has removed the controversial “angel tax” for all classes of investors, delivering a major victory to the country’s startup ecosystem that had lobbied for years against the measure.

“To bolster the India startup ecosystem, to boost entrepreneurial spirit and support innovation, I propose abolishing angel tax for all classes of investors,” Finance Minister Nirmala Sitharaman said in her budget speech.

The tax, introduced in 2012 as a measure to control money laundering, has long been a pain point for early-stage companies and their backers. It taxed investments in startups when valuations exceeded what tax officials deemed fair market value — a calculation that often clashed with investors’ more optimistic projections.

The Indian government attempted to simplify the tax in 2019, but even the new structure had limited benefits for the ecosystem. The local tax authority was scrutinizing investment in startups as recently as earlier this year.

“It is a watershed moment in the Indian startup story. A tax on capital is antithetical to capital formation and this has long been used to harass startups and investors,” Siddharth Pai, co-founder and partner at venture capital fund 3one4 Capital, told TechCrunch.

The problem stemmed from how different parties valued young companies. Investors typically use discounted cash flow methods, betting on future potential. Tax authorities, on the other hand, looked at current worth, which is usually low for fledgling startups. This mismatch led to headaches for founders trying to raise capital. For years, prominent voices in India’s startup ecosystem have railed against the angel tax. They argued it was choking off vital funding for innovation.

Amit Mehra, CFO of venture capital fund Lightspeed, said the abolition of the angel tax will help reduce the “significant uncertainty on taxation of investments received by startups on account of the angel tax provisions.”

“The removal of the tax will foster a more supportive environment for investments in the startups and will certainly fuel innovation and growth in the startups. This is essential for startups to remain in India and build from here,” he added.

Sitharaman also announced that the federal government will launch a $120 million venture capital fund to spur the growth of the country’s space economy.



Source link

Lisa Holden
Lisa Holden
Lisa Holden is a news writer for LinkDaddy News. She writes health, sport, tech, and more. Some of her favorite topics include the latest trends in fitness and wellness, the best ways to use technology to improve your life, and the latest developments in medical research.

Recent posts

Related articles

India issues notice to Wikipedia over concerns of bias

Wikipedia is facing mounting regulatory pressure in India as local authorities question whether the platform should continue...

Alan unveils AI health assistant for its 680,000 health insurance members

French tech startup Alan held a press conference this morning to announce three product updates. While it...

Coatue is raising $1B for AI bets

Coatue Management, a hedge fund that invested heavily in tech startups during the pandemic-infused boom, is raising...

Meta’s former hardware lead for Orion is joining OpenAI

Meta’s former head of augmented reality glasses announced on Monday she is joining OpenAI to lead robotics...

Datadog challenger Dash0 aims to dash observability bill shock

The end of zero-interest rates has driven companies to look for savings wherever they can, but one...

Bowery Farming is ceasing operations

Agtech unicorn Bowery Farming is shutting down, according to PitchBook, which cited internal documents and multiple company...

Apple users can soon upgrade to ChatGPT Plus within the Settings app

Apple products are getting an integration with OpenAI’s ChatGPT in December when iOS 18.2 rolls out, which...

Perplexity CEO offers AI company’s services to replace striking NYT staff

The CEO of AI search company Perplexity, Aravind Srinivas, has offered to cross picket lines and provide...