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Angle Tax: While presenting the budget, the Finance Minister has made a big announcement for startups. In which the government has abolished the angel tax imposed on startups. Angel tax was implemented in the year 2012. Let us know what this angel tax is and why there is a demand to remove it.
What is Angel Tax?
Startup companies or unlisted companies raise funds to grow their business. To raise this fund, shares are given to another company or organization. These shares are sold at a premium i.e. more than their fixed price. Therefore, the additional price received from selling shares is considered as income. The tax levied on this income is called angel tax. This process was done under Section 56 (2) (vii) (B) of the Income Tax Act, 1961. Angel tax was introduced in 2012 with the aim of preventing money laundering.
Why did the government impose this tax?
The government had implemented this tax to stop money laundering. Also, with its help, an attempt was made to bring all businesses under the tax net. Startups had to pay up to 30.9 percent tax on the funds received. Due to which startups were suffering losses. Therefore, there was a lot of opposition to this.
What will be the benefits of removing angel tax?
Startups will benefit from the abolition of angel tax. So the number of startups will also increase. Also, startups had to pay more tax than the income they earned, so Indian startups were not able to compete with global companies, which can happen now.