Angel Tax: Finance Minister Nirmala Sitharaman has made many big announcements in Parliament regarding the Union Budget 2024-25. One of these announcements has been made regarding Angel Tax. The Finance Minister said that Angel Tax has now been completely abolished. Let us know what was this Angel Tax and why there was already a demand to remove it. Along with this, we will know what effect will it have on the common man by abolishing it.
What is Angel Tax?
Angel Tax was implemented in the country in the year 2012. This tax was applicable on those unlisted businesses which used to get funding from angel investors. In simple language, it can be understood in this way that when a startup used to take funds from an angel investor, it used to pay tax on it as well. This entire process used to happen under section 56 (2) (vii) (b) of the Income Tax Act 1961.
Why did the government introduce this tax?
Actually, the government believed that through this it could stop money laundering. Apart from this, with the help of this tax, the government was trying to bring all types of businesses under the tax net. However, due to this step of the government, many startups of the country were facing losses. This was the reason why there was a demand to abolish this tax. The real problem with this tax was when the investment received by a startup exceeded its fair market value (FMV). In such a situation, the startup had to pay up to 30.9 percent tax.
Well, now the Modi government has abolished this tax and this will benefit the startups of the country. Let us tell you, in the last few years, the number of startups in the country has increased rapidly. Along with this, there are many startups that have become unicorns. The goal of the Modi government is to promote startups in the country. Therefore, it is making every possible effort to provide every kind of help to startups.
