Angel Tax Removal for Startups Recommended Ahead of Budget

New Delhi, Jul 5 (PTI) Ahead of the Union Budget, the Department for Promotion of Industry and Internal Trade (DPIIT) has recommended removal of angel tax on startups, but an integrated view will be taken by the finance ministry, a senior government official said.

In September last year, the Income Tax Department has notified new angel tax rules that comprise a mechanism to evaluate the shares issued by unlisted startups to investors.

While previously the angel tax -- a tax levied on capital received on the sale of shares of a startup above the fair market value -- applied only to local investors, the Budget for 2023-24 fiscal (April 2023 to March 2024) widened its ambit to include foreign investments.

Replying to a query on industry demand for removal of angel tax here on Thursday, DPIIT Secretary Rajesh Kumar Singh said: "Based on the consultation with the startup ecosystem that we have here we have recommended that in the past as well and I think we have recommended it this time also but ultimately an integrated view will be taken by the Ministry of Finance."

As per the Budget, the excess premium will be considered as 'income from sources' and taxed at the rate of up to over 30 per cent. However, startups registered by the DPIIT are exempt from the new norms.

To a query on Tesla, Singh said "the last we have heard from them" was in the week the results of general election was announced.

"Let's see. But the process of finalising the guidelines (for EVs) is on by the Ministry of Heavy Industries. They have more than one enquiry I understand...," he said.

On June 7, days after the declaration of the results of the general election, American tech billionaire Elon Musk in a post on X said he is looking forward to his companies doing "exciting work" in India as he congratulated Prime Minister Narendra Modi on his historic election victory.

The congratulatory message came two months after the CEO of the electric carmaker Tesla and microblogging platform X in April postponed his proposed visit to India due to "very heavy Tesla obligations".

Musk -- who was expected to be in India on April 21 and 22 and scheduled to meet Prime Minister Modi -- later wrote on X that he is looking forward to coming to India later this year.

In June last year, Musk met with Modi during the latter's US visit and stated that he planned to visit India in 2024 while expressing confidence that Tesla would enter the Indian market soon.