Representative image with the word 'tax'.
Credit: iStock Photo
Union Finance Minister Nirmala Sitharaman on Tuesday during her Union Budget speech said that the central government has proposed to abolish angel tax.
Angel tax refers to the tax paid by unlisted companies for gaining funds from angel investors.
It gets the name as it effects angel investors or those investors who provide their funds for start-ups or new ventures.
It was first introduced in the 2012 Union Budget by the then finance minister Pranab Mukherjee under the UPA-II regime to deter money laundering.
Sitharaman said, "I propose to abolish the Angel tax abolished for all classes of investors."
In 2018, the NDA government had issued a notification under Section 56 of the Income Tax Act, exempting startups in cases where the total investment including funding from angel investors did not exceed Rs 10 crore.
The startups were required to get approval from an inter- ministerial board as well as a certificate from a merchant banker to avail the exemption.
Rajya Sabha MP on X said," I was pleased to hear that the FM will abolish the Angel Tax. Congress has pleaded for the abolition for many years and most recently in the Congress Manifesto on page 31."
The Department for Promotion of Industry and Internal Trade (DPIIT) had made a recommendation to remove the Angel Tax after consulting with the start-up sector.
On July 4 DPIIT secretary Rajesh Kumar Singh had confirmed that the department has called for the removal of Angel tax ahead of the 2024-25 budget to be presented by FM Sitharaman.
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