angel tax deferred: Angel tax likely to be deferred to April 2024, centre proposes amendments to Finance Bill

In a big relief to Indian startups, the centre is likely to defer the Angel tax on non-residents to April 1, 2024. The Centre is learnt to have proposed amendments to the Finance Bill, which will likely be passed in the parliament today.

In the union budget 2023, the government had proposed to amend the angel tax provision or the section 56(2) (viib) of the income tax act in the budget through finance bill.

Also read | ETtech Explainer: Has the Budget 2023-24 resurrected ‘angel tax’?

The provision states that any premium paid by an investor in excess of the fair market value (FMV) of the shares of an unlisted company is taxable in the hands of the company at a rate of 20% or above.

The government has now proposed to bring foreign investors under the ambit of the angel tax which hitherto applied to Indian residents and funds not registered as Alternative Investment Funds (AIFs).

Also read | Angel tax on foreign investors may muddle maths for startups

The objective of introducing the section was to deter the generation and use of unaccounted money through subscription of shares of a closely held company, at a value which is higher than fair market value.The startup ecosystem and investors have expressed concerns as foreign investment remains a major source of funding.

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