Budget 2024: Nirmala Sitharaman Boosts India's Startup Ecosystem

The government has announced its intention to eliminate the angel tax on all asset classes, as stated by Finance Minister Nirmala Sitharaman at the presentation of the Union Budget for 2024-25. This move is expected to greatly benefit the startup ecosystem.

Section 56 (II) (viib) of the Income Tax Act, sometimes referred to as angel tax, is applied when a privately-held corporation issues shares at a value higher than their fair value, resulting in an excess consideration.

The modifications to the angel tax system will come into effect on April 1, 2025, and will be relevant for the assessment year 2025-26, according to the Budget statement.

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The tax was initially implemented in the 2012 Union Budget by former finance minister Pranab Mukherjee during the UPA-II regime with the aim of preventing the illegal movement of money.

Siddarth Pai, founding partner at early-stage venture fund 3one4 Capital, said: "The announcement of the removal of Angel Tax for all classes of investors is a huge reform. This is essential for startups to remain in India and build from here. This is a major step forward for Indian startups. It is a watershed moment in the Indian startup story,"

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