India’s Finance Ministry has notified a total of twenty one nations, investments from which in Indian start-ups will be exempted from Angel Tax. The list of twenty one nations include United States, United Kingdom, and France among others. Non-resident investment in unlisted Indian startups from these countries will not attract Angel Tax, the Central Board of Direct taxes (CBDT) has notified.
India’s Finance Ministry has notified a total of twenty one nations, investments from which in Indian start-ups will be exempted from Angel Tax. The list of twenty one nations include United States, United Kingdom, and France among others. Non-resident investment in unlisted Indian startups from these countries will not attract Angel Tax, the Central Board of Direct taxes (CBDT) has notified.
Notably, the list of twenty one nations excludes investment from countries like Singapore, Netherlands, and Mauritius.
Notably, the list of twenty one nations excludes investment from countries like Singapore, Netherlands, and Mauritius.
In the Union Budget, the Indian government had brought overseas investment in unlisted closely held companies, except DPIIT recognised startups, under the Angel Tax net.
In the Union Budget, the Indian government had brought overseas investment in unlisted closely held companies, except DPIIT recognised startups, under the Angel Tax net.
Folloiwng this development, the startup and venture capital industry sought exemption for certain overseas investor classes.
Folloiwng this development, the startup and venture capital industry sought exemption for certain overseas investor classes.
The CBDT on 24 May notified classes of investors who would not come under the Angel Tax provision.
The CBDT on 24 May notified classes of investors who would not come under the Angel Tax provision.
Excluded entities include those registered with Sebi as Category-I FPI, Endowment Funds, Pension Funds and broad-based pooled investment vehicles, which are residents of 21 specified nations, including the US, UK, Australia, Germany and Spain, as per the notification.
Excluded entities include those registered with Sebi as Category-I FPI, Endowment Funds, Pension Funds and broad-based pooled investment vehicles, which are residents of 21 specified nations, including the US, UK, Australia, Germany and Spain, as per the notification.
The other nations mentioned in the notification are Austria, Canada, Czech Republic, Belgium, Denmark, Finland, Israel, Italy, Iceland, Japan, Korea, Russia, Norway, New Zealand and Sweden.
The other nations mentioned in the notification are Austria, Canada, Czech Republic, Belgium, Denmark, Finland, Israel, Italy, Iceland, Japan, Korea, Russia, Norway, New Zealand and Sweden.
The CBDT notification comes into effect on 1 April.
The CBDT notification comes into effect on 1 April.
Nangia Andersen India Chairman Rakesh Nangia said by explicitly mentioning this list of countries, the government aims to attract more foreign investment (FDI) into India from countries that have robust regulatory frameworks.
Nangia Andersen India Chairman Rakesh Nangia said by explicitly mentioning this list of countries, the government aims to attract more foreign investment (FDI) into India from countries that have robust regulatory frameworks.
“Surprisingly, countries such as Singapore, Ireland, Netherlands, Mauritius etc from where the majority of inbound FDI is channelised into India, do not find a mention in this notification,” Nangia said.
“Surprisingly, countries such as Singapore, Ireland, Netherlands, Mauritius etc from where the majority of inbound FDI is channelised into India, do not find a mention in this notification,” Nangia said.
Stakeholders may still have to hold their horses on a formal notification on the valuation guidelines as rules on the same are proposed to be released after a stakeholder consultation process, he added.
Stakeholders may still have to hold their horses on a formal notification on the valuation guidelines as rules on the same are proposed to be released after a stakeholder consultation process, he added.
The CBDT is expected to come out with valuation guidelines for valuing non-resident investment in unrecognised startups for the purpose of levying income tax.
The CBDT is expected to come out with valuation guidelines for valuing non-resident investment in unrecognised startups for the purpose of levying income tax.
Under the existing norms, only investments by domestic investors or residents in closely held companies were taxed over and above the fair market value. This was commonly referred to as an angel tax.
Under the existing norms, only investments by domestic investors or residents in closely held companies were taxed over and above the fair market value. This was commonly referred to as an angel tax.
The Finance Act, 2023, has said that such investments over and above the FMV will be taxed irrespective of whether the investor is a resident or non-resident.
The Finance Act, 2023, has said that such investments over and above the FMV will be taxed irrespective of whether the investor is a resident or non-resident.
Post the amendments proposed in the Finance Bill, concerns have been raised over the methodology of calculation of fair market value under two different laws.
Post the amendments proposed in the Finance Bill, concerns have been raised over the methodology of calculation of fair market value under two different laws.
