Industry The Department of Promotion and Internal Trade (DPIIT) has recommended the removal of angel tax on startup companies before the Union Budget. But the Finance Ministry will take the final decision on this. A senior government official has said this. The Income Tax Department notified new angel tax rules in September last year, which also includes a system for investors to evaluate shares issued by unlisted startups.
what is angel tax
Angel tax is a tax on capital raised by selling shares of a startup above the fair market value. Earlier, angel tax was applicable only to local investors, but the budget for the last fiscal year had expanded its scope to include foreign investment. On a question related to the industry demand for removal of angel tax, DPIIT Secretary Rajesh Kumar Singh said, “Based on consultation with the startup ecosystem, we have recommended it earlier and I think we have recommended it this time too, but ultimately the finance ministry will take an integrated approach on this.”
Additional premium is being treated as ‘income from other sources’
According to the budget recommendations, the additional premium will be treated as ‘income from sources’ and will be taxed at a rate higher than 30 per cent. However, startups registered with DPIIT are exempt from the new norms. On a question related to US electric car (EV) company Tesla coming to India, Singh said, “We last heard from them in the week when the results of the general elections were announced. The process of finalising the guidelines issued by the Ministry of Heavy Industries for EVs is underway. I think they may have more questions.” There has been discussion for several months about the possibility of US industrialist Elon Musk-led Tesla setting up a plant in India.
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