Finance Minister Nirmala Sitharaman Abolishes Angel Tax to Boost Indian Startups
New Delhi [India], July 23: To strengthen the Indian startup ecosystem and encourage innovation, Finance Minister Nirmala Sitharaman has proposed to abolish the angel tax for all classes of investors. This move, long requested by the industry, is expected to drive more investments into startups.
Startups play a crucial role in economic growth by generating new jobs, ideas, products, and services. DPIIT secretary Rajesh Kumar Singh had called for the removal of the angel tax ahead of the Budget.
The abolition of the angel tax has also received praise from the opposition. Former Finance Minister P Chidambaram expressed his approval, noting that the Congress party had advocated for this change for many years.
Angel tax refers to the income tax levied on funding raised by unlisted companies if their valuation exceeds the company’s fair market value. Introduced in 2012 to detect money laundering and bogus startups, the tax has been a contentious issue. In 2018, the government provided exemptions for startups with investments not exceeding Rs 10 crore, subject to certain approvals.
Prashant Bothra, Founder of Fhero Accounting Solutions, emphasized that reducing or abolishing the angel tax is essential for better funding mechanisms and growth.
Doubts Revealed
Finance Minister -: The Finance Minister is a government official in charge of the country’s money matters, like taxes and spending. In India, this person helps make decisions about how the government uses its money.
Nirmala Sitharaman -: Nirmala Sitharaman is the current Finance Minister of India. She helps make important decisions about the country’s finances.
Angel Tax -: Angel tax was a tax on the money that startups received from investors if the amount was more than what the government thought was fair. It was introduced in 2012 to prevent money laundering.
Startups -: Startups are new companies that are just beginning to develop. They often have innovative ideas and need money from investors to grow.
Ecosystem -: In this context, an ecosystem refers to the community of startups, investors, and other businesses that work together to help new companies grow.
Investments -: Investments are when people put money into a business with the hope of making more money in the future. For startups, investments are crucial for growth.
Economic Growth -: Economic growth means the economy is getting bigger and stronger. This usually means more jobs and better living standards for people.
Job Creation -: Job creation means making new jobs for people. When startups grow, they often need to hire more people, which helps reduce unemployment.
Unlisted Companies -: Unlisted companies are businesses that are not listed on the stock market. This means their shares are not available for the public to buy and sell.
Valuation -: Valuation is the process of determining how much a company is worth. This is important for investors to know how much money to invest.
Fair Market Value -: Fair market value is the price that something would sell for on the open market. It’s what a willing buyer would pay a willing seller.
P Chidambaram -: P Chidambaram is a former Finance Minister of India. He has also been involved in making important financial decisions for the country.