July 23, 2024: Startups and Angel Investor has something to cheer up for from The Union Budget 2024 that has introduced significant tax reforms designed to foster innovation and attract investment into the burgeoning startup sector. Recognizing the critical role startups play in driving innovation and economic growth, the government’s decision to abolish angel tax for all investor classes is seen as a catalyst for revitalizing the startup ecosystem.
This reform is expected to streamline investment processes, reduce administrative hurdles, and spur greater investor confidence in backing early-stage ventures. Key highlights include the abolishment of the controversial angel tax and a harmonization of capital gains rates across listed and unlisted equities.
Angel tax, a contentious provision under Section 56(2) (viib) of the Income Tax Act, has long been criticized for imposing a hefty 30.9% tax on investments made in unlisted companies that exceed their fair market value. This provision, originally intended to curb tax evasion, has often been seen as a hurdle for startups seeking early-stage funding.
In her Budget speech, Finance Minister Nirmala Sitharaman emphasized the government’s commitment to nurturing entrepreneurship and innovation by announcing the abolition of angel tax for all classes of investors. This move is expected to simplify investment processes, reduce compliance burdens, and stimulate greater funding into startups across the country.
The budget also includes a revision in long-term capital gains tax rates for financial assets, lowering it to 12.50% from the previous 20%. This adjustment aims to align taxation policies between listed and unlisted equities, further incentivizing investments in startups and financial markets.
Startups, Investors welcome the Budget 2024 Reforms Enthusiastically
The startup community has welcomed these reforms announced in the Budget 2024 enthusiastically, viewing them as crucial steps towards creating a more conducive environment for growth and innovation. Startups, which faced a significant funding crunch in recent years, hope that these tax changes will encourage more risk capital inflows and support their expansion plans.
Budget 2024–25 will boost StartUps and the StartUp ecosystem through bold and innovative proposals like ending “Angel Tax” and introducing paid internships,” says Union Minister @DrJitendraSingh
Raise in Mudra loan limit to Rs 20 lakh, Rs 1 lakh crore for Anusandhan National Research Foundation and five times increase in next ten years while earmarking Rs 1,000 crore Venture Fund for Space StartUps all supplement each other to together further strengthen India’s StartUp ecosystem.
The abolition of #AngelTax is a much-needed resolution which removes the uncertainty in the fundraising process by start-ups. The clarity will help both #startups and investors move forward decisively. Also, we strongly welcome the government’s focus on boosting employment and skilling. The #Budget2024 has both the big picture and the specific initiatives to propel India ahead: Mr @rohitkbansal , Chair, FICCI Startup Committee and Co-Founder, @TitanCapitalVC & Snapdeal.
Furthermore, the budget has earmarked Rs 1,000 crore for a venture capital fund aimed at boosting the space technology sector in India. This initiative aligns with the government’s ambitious goal of expanding the space economy fivefold over the next decade, providing a new frontier for entrepreneurial ventures in the country.
Overall, the Union Budget 2024’s focus on simplifying tax structures, reducing burdensome provisions like angel tax, and fostering high-growth sectors like space technology reflects a strategic commitment to economic rejuvenation through innovation and entrepreneurship. These measures are poised to make India a more attractive destination for both domestic and international investors, bolstering its position as a global hub for startups and technological advancements.
