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Source: The post is based on the article “Centre softens angel tax rules” published in “The Hindu” on 27th September 2023.
What is the News?
The Finance Ministry has notified final rules outlining valuation methods for non-resident and resident investors under the new angel tax mechanism in the Finance Act 2023.
What is Angel Tax?
Source: The Hindu
Angel tax is levied when an unlisted company issues shares to an investor at a price higher than its fair market value (FMV).
Introduced in: It was introduced in 2012 as a measure to prevent generation and circulation of unaccounted money, experts said.
– It was called the angel tax as it initially applied primarily to Indian angel investors – usually high net worth individuals who invest in startups at a very early stage
Applicability: Earlier, angel tax was levied only on investments made by resident or local investors. However, the Budget expanded its scope to cover non-resident investors.
Criticism: Angel tax has been criticized by startups and investors, who argue that it discourages investments in startups as it is common practice to sell shares at a steep premium.
