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  • May 24, 2023
  • Changes to angel tax will provide relief to small businesses, startups: Experts

    Fundraising for small businesses and startups would become easier with the Government notifying certain classes of persons being non-resident investors to whom provisions of angel tax not be applicable.

    According to a statement by the Central Board of Direct Taxes, this includes, Government and Government related investors such as central banks, sovereign wealth funds, international or multilateral organizations or agencies including entities controlled by the Government or where direct or indirect ownership of the Government is 75% or more.

    Banks or Entities involved in insurance business where such an entity is subject to applicable regulations in the country where it is established or incorporated or is a resident are also excluded.

    The statement added that any entity, which is a resident of a certain country or specified territories having robust regulatory framework, like entities registered with Securities and Exchange Board of India as Category-I Foreign Portfolio Investors and Endowment Funds associated with a university, hospitals or charities will also be excluded.

    “The notification from CBDT and MF has been well received by the PE/VC industry as it provides more clarity to Indian startups and investors in relation to section 56(2)(viib). The proposed norms aim to expand valuation methodologies and eliminate price differentials between resident and non-resident investors. We thank the Finance Ministry for actively addressing the industry's concerns and acknowledging a broader range of institutional investors in the exempted list. This inclusive approach will facilitate ongoing investments in the country,” sais Karthik Reddy, Managing Partner, Blume Ventures & Chairperson, IVCA.