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Finance Minister Nirmala Sitharaman has made many big announcements in Parliament regarding the Union Budget 2024-25. One of these announcements is regarding Angel Tax. The Finance Minister said that Angel Tax has now been completely abolished. Let us know what this Angel Tax is and why there was already a demand to remove it. Along with this, we will also know what impact its abolition will have on the common man.
What is Angel Tax?
Angel tax was implemented in the country in the year 2012. This tax was applicable on those non-listed businesses that received funds from angel investors. In simple language, it can be understood that whenever a startup took funds from an investor, it also paid tax on it. The entire process was done under Section 56 (2) (vii) (B) of the Income Tax Act, 1961.
Why did the government introduce this tax?
The government believed that doing so would prevent money laundering. Apart from this, the government is trying to bring every kind of business under the tax net with the help of this tax. However, many startups in the country are facing losses due to this move of the government. This was the reason why there was a demand to abolish this tax. The real problem regarding this tax arises when the investment received by the startup is more than its fair market value (FMV). In such a situation, the startup had to pay up to 30.9 percent tax.
Startups will benefit
Now the Modi government has abolished this tax and this will benefit the startups of the country. Let us tell you that in the last few years the number of startups in the country has increased rapidly. Along with this, there are many such startups which have become unicorns. The goal of the Modi government is to promote startups in the country. Therefore, it is making every effort to provide all kinds of help to the startups.