'Angel tax ends pref treatment of foreigners'

The return of angel tax is nothing but an attempt to level the playing field for domestic investors that is currently tilted in favour of foreign entities, a top government official said.

- Ravi Dutta Mishra, RanyantRaehavan

The Union budget for 2023-24 has proposed to bring foreign investors within the ambit of angel tax, which is applied on the premium to the fair market value of a company's shares when it raises capital.

The move has raised fears in the investor and startup communities that it would worsen the ongoing funding crunch, especially given that foreign private equity and venture capital investments in Indian startups fell to $54 billion in 2022 from $77 billion the previous year.

"There is no angel tax on startups. Let me be clear. (Section) 56.2 (VII B) used to have two provisions. One was the preferential treatment of foreign players. Preferential treatment has been done away with. But for startups, there is no change. A DPIIT (Department for Promotion of Industry and Internal Trade)-recognized startup will not attract angel tax if the investment is made into that," Anurag Jain, secretary of DPIIT, said at a press conference.