Angel Tax for Start-ups: Understanding the Changes and Regulations

What is Angel Tax?

Angel Tax, introduced in 2012, is a levy imposed on unincorporated businesses that receive investments from external sources, such as angel investors or venture capitalists. The tax aims to prevent the use of these investments for tax evasion.

Changes in Angel Tax Rules in the Recent Budget

In the recent budget, the government announced several changes to the Angel Tax rules, including:

• Raising the threshold: The threshold for investments that are exempt from Angel Tax has been increased from INR 10 crores to an undisclosed limit.
• Clearer definition of "angel investors": The definition of "angel investors" has been clarified to include only individuals who invest their own capital in start-ups.
• Establishment of Angels Tax Cell: The government has established an Angels Tax Cell within the Central Board of Direct Taxes (CBDT) to streamline the process of tax assessment and provide support to start-ups.

These changes are expected to provide relief to start-ups and encourage angel investments in the country.