Tax benefits, including the removal of the controversial angel tax for all investor classes and the matching of capital gains tax rates for listed and unlisted equity, have been announced for startups and their investors.
Angel tax, which is formally known as Income Tax Act Section 56(2) (viib), is imposed on unlisted businesses that raise money by selling investor shares at a price higher than their fair market value. The excess is taxable at 30.9% and is considered income.
Aside from the angel tax, the budget reduced the long-term capital gains tax rate on financial assets from 20% to 12.5%. Startups and investors have praised the angel tax move.
This gives the startup ecosystem new vitality. Adarsh Nahata, chief financial officer (CFO) of PhonePe, stated, “This progressive step by the government eliminates a significant compliance burden, attracting investment and fostering an environment where startups can truly thrive.
According to market intelligence platform Tracxn, startup funding dropped 72% year over year (Y-o-Y) in 2023 to $7 billion, a seven-year low from $25 billion the year before. This action is anticipated to facilitate quicker transaction completion and investment streamlining for investors.
Also Read:
What Foods Can You Eat To Boost Your Mental Health?
Bombay High Court Orders Social Media Companies To Remove NSE MD Deepfakes
