Budget 2024: India's Finance minister Nirmala Sitharaman has proposed the abolishment of the 'Angel Tax' for all classes of investors to promote the growth of budding entrepreneurs in the country. Finance Minister Nirmala Sitharaman made this move while presenting the Union Budget 2024-25 on Tuesday. 


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"To bolster the Indian startup ecosystem, boost the entrepreneurial spirit, and support innovation, I propose to abolish the so-called angel tax for all classes of investors," FM Nirmala Sitharaman said while presenting the budget 2024. 


What Is Angel Tax And How Will It Benefit Investors? 


The "Angel Tax" refers to a levy imposed on the capital raised by unlisted companies through the issuance of shares to investors. This tax targets the premium paid by investors above the fair market value of the shares, classifying it as "income from other sources" and taxing it accordingly. The Angel Tax was Introduced in India in 2012 which aims to curb money laundering and prevent the inflow of unaccounted money.


In September last year, the Income Tax Department notified new angel tax rules that comprise a mechanism to evaluate the shares issued by unlisted startups to investors. Over 1.17 lakh startups are registered with the government. They are eligible for availing of incentives under the government's Startup India initiative. 


Commenting on the announcement, Deloitte India Partner Sumit Singhania said it is a positive move as it would help reset not only the tax cost matrix for investors in startups but for foreign strategic investors as well.


“It also puts out a progressive view of tax policy making by the government. Since this levy has stung for more than a decade since it was introduced in 2012, the withdrawal of angel tax entirely means a timely course correction as the government rolls out the red carpet for long-term strategic investment as well as more risk-capital to promote innovation and R&D,” he said. (With Inputs From PTI)