“To bolster the India startup ecosystem, to boost entrepreneurial spirit and support innovation, I propose abolishing angel tax for all classes of investors,” Finance Minister Nirmala Sitharaman said in her budget speech.
Senior Congress leader P Chidambaram took a swipe at the government over the Union Budget.
"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," posted Chidambaram on X, formerly known as Twitter.
What is Angel tax?
Angel tax refers to a tax levied on the capital raised via the issue of shares by unlisted companies from an Indian investor if the share price of issued shares is seen in excess of the fair market value of the company. However, the excess realization is considered as income and is taxed accordingly.
The Angel Tax was introduced in 2012. It has long been a pain point for early-stage companies and their backers. While it taxed investments in startups when valuations exceeded what tax officials deemed fair market value (a calculation that often clashed with investors’ more optimistic projections), the Indian government attempted to simplify the tax in 2019.