Abolition of angel tax marks a landmark reform benefiting India’s startup ecosystem: US India Strategic and Partnership Forum

Washington: The abolition of the angel tax across all investor classes marks a landmark reform benefiting India's startup ecosystem, the US India Strategic and Partnership Forum (USISPF) said Tuesday and applauded the proposal in the Union Budget to reduce tax rates for the foreign companies to 35 per cent.

“India has long been a country of engineering and tech talent, yet there have been gaps in the innovation ecosystem. The abolition of the angel tax across all investor classes marks a landmark reform benefiting India's startup ecosystem. This important reform will stimulate increased startup funding from both domestic and international sources,” the US India Strategic and Partnership Forum (USISPF) said.

Applauding the decision to reduce tax rates for the foreign companies to 35 per cent, the USISPF said this action creates parity between domestic and foreign players and will be an important boost for global investors seeking to shift their international supply chains away from China.

At the same time, the duty cuts on critical imports such as medical equipment, mobile phones and chargers, and solar energy machinery will enhance local manufacturing capabilities and enhance supply chain efficiencies, which are crucial for India's industrial growth, it said.

Observing that the inaugural budget of Modi 3.0 strikes a fine balance between inclusive fiscal prudence, and growth-oriented initiatives, and supports both consumers at home and foreign investors with steps to enhance the ease of doing business in India, the USISPF said the budget's salient features touched on reducing tax and tariff burdens on individuals and industries, a hallmark of Prime Minister Narendra Modi's fiscal priorities.

The budget, it said, caters to healthcare priorities in duty exemptions on vital cancer drugs, reiterating the government's commitment to accessible healthcare and improving affordability for life-saving treatments.

It welcomed key measures to increase financial sector efficiency and transparency, including the establishment of a financial sector vision and strategy, taxonomy for ESG financing, and simplification of FDI regulations. These initiatives are crucial for attracting foreign investment and promoting economic growth, it said and appreciated the government's intent to strengthen the debt recovery infrastructure.

In a move to boost the renewable energy sector, the USISPF welcomed the emphasis on critical mineral missions, energy transition policies, and digitalization. “These efforts will drive investments in mining, green technologies, and innovation,” it said.

“With regards to digital taxation, the removal of the equalization levy and ongoing reforms aimed at fair taxation practices for non-resident digital companies reflect India's proactive adaptation to the digital economy,” it said.

“Moreover, the budget introduced significant reforms in transfer pricing regulations, including streamlined assessment procedures and an expanded scope of safe harbors, which will enhance transparency and fairness in cross-border transactions. These reforms not only promote compliance but also reduce tax disputes, fostering a favourable enviroru11ent for business operations in India,” the USISPF said.

The USISPF said it is confident that the Budget will further propel India’s economic growth and act as a catalyst for accelerated economic progress, boosting investments, job creation and innovation, and further solidifying India's position as a global economic powerhouse.