Central Government removes “Angel Tax”, A big relief to Investors Funding Startups

Angel Tax-Central Government-taxscan

The Government has decided to remove “angel tax” for investors providing funding to startups. Recently, the Prime Minister announced the Government-approved plan of granting relief to funding to startups. This is with an ambitious plan to boost startups and thereby to promote entrepreneurship and job opportunities in India. Resident angel investors, domestic family officers domestic family offices or funds which were not registered as VC funds have been excluded from tax.

Currently, the funds raised by an unlisted company through equity issuance are charged to tax under the head “income from other sources” to the extent the amount is in excess of the fair market value under section 56(2) of the Income Tax Act, 1961. Such amount is taxable at the rate of 30%. The Central Board of Direct Taxes has issued a notification amending section 56(2)(viib).

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