Know more about Angel Tax ?

Angel tax is a tax levied on investments made by angel investors in startups. The tax rate is currently 30%. The tax is levied on the amount of the investment that exceeds the fair market value of the shares issued by the startup.

The angel tax was introduced in 2012 by the Indian government in an effort to curb money laundering and black money. However, the tax has been criticized by many as being a disincentive to investment in startups.

In 2023, the Indian government made some changes to the angel tax rules. These changes include:

• ? The tax will no longer be levied on investments made by foreign angel investors.
• ??The tax will only be levied on investments made by resident angel investors if the investment exceeds the fair market value of the shares issued by the startup by more than INR 25 lakhs (USD 33,000).

The changes to the angel tax rules are a positive step, but they do not go far enough. The tax should be abolished altogether in order to encourage investment in startups.

Here are some of the challenges faced by startups due to angel tax:

• ??Startups have to pay a high tax rate on angel investments. This can make it difficult for startups to raise the capital they need to grow.
• ??The angel tax is a disincentive for angel investors to invest in startups. Angel investors are more likely to invest in businesses that are not subject to the angel tax.
• ??The angel tax is a complex and time-consuming tax to comply with. This can add to the administrative burden of startups.

The government should abolish the angel tax in order to encourage investment in startups. This would help to create jobs and boost economic growth.

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