RT team
In a significant move to propel the Indian startup ecosystem forward, Finance Minister Nirmala Sitharaman announced the abolition of the angel tax during the union budget for 2024-25. Introduced in 2012 to combat money laundering, this tax was levied on startup funds from angel investors exceeding the companies’ fair market value, with rates as high as 30.9%. Criticized for hindering innovation and fundraising, its removal has been met with widespread relief among startups and investors.
Former NASSCOM chairman and Indian Angel Network co-founder, Saurabh Srivastava, described the tax as a hastily implemented measure that severely impeded startup growth. Through persistent advocacy and numerous government meetings, stakeholders like Srivastava have played a crucial role in overturning this policy. With the angel tax gone, Srivastava predicts a surge in startup numbers from 100,000 to a million within five years, accompanied by increased foreign investment, job creation, and innovative solutions across various sectors.
The timing is pivotal as India’s startup funding saw a sharp decline from $42 billion in FY 2022 to $11.3 billion in 2023. The abolition is expected to rejuvenate investor confidence and attract more investment into India’s startup scene, the third-largest globally. This move aligns with India’s goal to become a $10 trillion economy by 2030 and marks a significant step towards simplifying investments while retaining more capital for growth and innovation within the startup sector.
