No angel tax on investment in startups of 21 countries including America, England and France

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Ahmedabad: As investment in Indian startups slows down, the government has tweaked the tax levied on investments to exclude certain countries. In a notification issued by the Finance Ministry, investments in Indian startups from 21 countries, including the US, England and France, will no longer attract angel tax. However, this list does not include investments from countries such as Singapore, Netherlands and Mauritius.

In the February 2023 budget, the central government had made a provision to impose angel tax on investments coming from abroad in unlisted startups. However, startups recognized by the Department for Promotion of Industry and Internal Trade were exempted from this tax. Following this provision, the startup and venture capital industry requested exemption of certain categories of foreign investors. The Central Board of Direct Taxes on May 24 released a list of categories of investors who are not eligible for angel tax.

As per the notification, investments made by certain categories of residents of 21 countries will not attract angel tax. This includes entities registered under Category-I FPIs with SEBI, endowment funds, pension funds and pooled investment vehicles.

Countries on the list include Canada, Czech Republic, Belgium, Denmark, Finland, Israel, Italy, Iceland, Japan, Korea, Russia, Norway, New Zealand and Sweden, besides the US, UK, Australia, Germany and Spain. This notification of CBDT will be effective from April 1. Market experts said that by clearly mentioning these countries, the government has made it clear that its objective is to bring more foreign investment to India from countries with strong regulatory framework. However, the surprising thing is that countries like Singapore, Ireland, Netherlands, Mauritius which bring maximum FDI in India are not included in this list.