We all know how taxation works. Certain amount of money is to be paid to the government through taxes. In India now the startups are rising. People are growing their own business.
Angel tax comes into play in the case of start ups. When the investment of the investor exceeds the fair market value then one has to pay angel tax to the government. This tax is paid to prevent cases of money related fraud.
The Government of India wants to boost the growth of startups in India and that is why the angel tax is now going to be abolished from the upcoming year. Let us share insights about it in the next section.
Demerits of angel tax in India
As mentioned earlier, angel tax is imposed in order to stop money laundering. Along with this merit there are many demerits of angel tax in India. Check out the drawbacks of angel tax in India.
- Investors who are looking to invest for the first time fail to collect a lot of money.
- Lots of money is lost by paying angel tax.
- Non resident investors are not eligible for deduction of this tax.
- Investors need a great sum of money to start their business.
These are the drawbacks of angel tax in India. Investors feel.it difficult to afford all this money and thus the start ups go through issues.
Angel tax rate in India
The angel tax rate in India is decided on the basis of rules and regulations. The tax is levied at a rate of 30 percent if the investment received is higher than the fair market value. Income tax department needs the angel tax from the respective company or firm.
Exemption from Angel tax
The exemption from angel tax can be enjoyed if the criterias are being fulfilled. You can check out the main criterias that are required to be fulfilled for exemption from angel tax. The criterias are shared as follows.
- Share premium of the company should not exceed Rs 25 crore. The maximum capital is to be maintained.
- In case of individuals who are Non residents, the turnover of their company should not be more than Rs.100 crores in the last year.
- The net worth of the investor should not be more than Rs.2 crores from the last few years. It is an important criteria.
- The startup can enjoy the benefit of not paying tax in the starting of three years.
These points tell how you can be eligible for the exemption of not paying angel tax. Note these points and then get good outcomes.
Non residents investors and exemption from angel tax in certain cases
Also, consider the link – Tax Implications of Stock Market Investments
Now it is said that non resident investors in specific fields are exempted from angel tax. The certain areas where provision of angel tax is no more required are shared as follows.
- Central banks’ investments dont need angel tax.
- Sovereign wealth funds are also exempted from this.
- Multilateral agencies are also covered in this.
- Organisation where the indirect or direct involvement of the government is present, angel tax is exempted for them.
Now they can invest freely for the best benefits. You can also study more about the new rules on angel tax. Check out the sections that are shared here.
New rules for angel tax
New rules have been proposed for the angel tax. You can check out the regulations and then you can get to know how they work. Check out the new rules and regulations that are shared as follows.
- E verification will now be continued. The verification of investors will be done easily and the long term process for the same is now replaced.
- The turnover value is now exceeded to Rs.100 crore and more.
- One can even be exempted from angel tax if the net worth of the company is Rs 250 crore and more.
The new rules bring great changes in the lives of people. They help to empower the startups in India. The finance minister of the nation has made changes in order to boost up the process of start ups. Now from the upcoming year 2025-2026 the angel tax is going to be abolished. It further creates many opportunities for young investors.
The impact of new rules of angel tax
Note – Tax Implications of Stock Market Investments
The regulations made by the government have opened many gateways for young investors. One can check the following points to understand how great the impact is.
- Startups can now be done easily. The business requirements and other criterias will be fulfilled by them.
- The business model will be created easily and one can work according to it.
- The tax exemption gives them better investment opportunities and enables them to enjoy the opportunities.
- Better funding can be helpful for them.
- Great returns can now be taken and enjoyed.
All these are the positive impacts of the new rules regarding angel tax. New investors can now step towards the best outcomes. The next year will provide a lot of relaxation and relief to all the investors. Investors can start their preparation for investing rightly.
Angel tax direct or indirect varies on the type. It is now abolished by the government in order to promote the future of startups. From last year the issues of angel tax were noticed but now they are resolved. So if you were tense about the taxes then now you can stay stress free.
You may also read our latest post – The Best Investment Plans in India for the Middle Class
Conclusion
Angel tax was given by the startup owners. The tax was given if the value exceeds the fair market value. Many rules and regulations are now changed with regard to angel tax. It was imposed to safeguard the money laundering case. From the upcoming year the angel tax is going to be abolished. One can invest without any worry. If you are a young investor then you can take advantage of it. Get the right information and start investing. You will get the best outcomes by getting the best information. Check out the blog on angel tax and then get good information.
