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Angel Tax
Context
The department for promotion of industry and internal trade proposed relieving new businesses of angel tax.
About:
- It is a 30% tax that is levied on the funding received by Startups from an external investor.
- However, this 30% tax is levied when Startups receive angel funding at a valuation higher than its ‘fair market value’.
- It is counted as income to the company and is taxed.
- Angel tax was introduced in 2012, with the purpose of keeping money laundering in check.
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Section 56(2) VII B of the Income Tax Act, also known as the ‘angel tax’ was first introduced in 2012 to deter the generation and use of unaccounted money through the subscription of shares of a closely held company at a value that is higher than the fair market value of the firm’s shares. |
Provision related to Angle Tax under Finance Act 2023:
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