Angel Tax Removal Boosts India's Start-up Ecosystem - Nasscom

New Delhi, Jul 23 (PTI) The government's move to scrap angel tax is set to transform the start-up ecosystem, Nasscom said on Tuesday noting that the levy had been stifling growth by deterring investments despite India's global standing as third-largest start-up base.

Other measures highlighted by the IT industry's apex body as being welcome steps include a cut in TDS rate on ecommerce operators; expansion in scope of safe harbour rules and streamlining of transfer pricing assessment procedures; and Rs 1000 crore venture capital fund for space tech.

"Despite India boasting the world's third-largest start-up ecosystem, the angel tax has been stifling growth by deterring legitimate investments. The government's announcement to completely abolish the Angel Tax is set to transform the start-up ecosystem," Nasscom said in a statement.

Terming it a "significant victory" and a long-standing request from industry, Nasscom said such a tax does not exist elsewhere in the world, and its abolition will boost India's global innovation and entrepreneurial competitiveness.

"The announcement to expand the scope of safe harbour rules and the streamlining of transfer pricing assessment procedures is a welcome step...We will now be working with the government on the details so that the budget announcement is translated into actual reforms in the safe harbour and transfer pricing framework," the statement said.

Once done, this would make India's transfer pricing regime more attractive and competitive, boost IT exports and ease business for Global Capability Centres (GCCs) and the IT services industry.

The Budget has acknowledged MSMEs as the backbone of economic growth, Nasscom said citing regulatory support for MSMEs through introduction of a credit guarantee scheme for machinery purchases, a self-financing guarantee fund of Rs 100 crore, a new assessment model for MSME credit based on digital footprints, among other measures.

Notably, Finance Minister Nirmala Sitharaman, while presenting the Union Budget also announced a proposed reduction in TDS rate on e-commerce operators to 0.1 per cent from one per cent at present.

Nasscom said the move would encourage more sellers to participate in ecommerce activity.

"For payments made by ecommerce platforms to sellers, this will help in unlocking working capital for the sellers on ecommerce and encourage sellers to participate in ecommerce activity," Nasscom said.

On the abolition of the 2 per cent equalisation, the association said that it had indeed advocated the abolition of the levy on e-commerce supply of goods or services.

"While this was transitory provision, abolishing this will go a long way in boosting the sector," Nasscom said.

According to Nasscom, budget underscores India's ambition to lead on the global stage while driving inclusive and sustainable advancement.

"While we will continue to work with the stakeholders to ensure faster planning and execution of the reforms, we will also continue to work with the government to prioritise and identify specific intervention points for quicker implementation," Nasscom said.