No angel tax on investments in startups from 21 countries including the US, England and France

Investments coming from Mauritius, Singapore and Netherlands will be taxed : CBDT

AHMEDABAD: As investment in Indian startups slows down, the government has changed the tax levied on investment to exclude certain countries. In a notification issued by the Finance Ministry, investment in Indian startups from 21 countries, including the US, England and France, will no longer be subject to angel tax. However, this list does not include investments from countries like Singapore, Netherlands and Mauritius.

In the budget of February 2023, the central government made a provision to levy angel tax on investment coming from abroad in unlisted startups. However, startups recognized by the Department for Promotion of Industry and Internal Trade were exempted from this tax. Following this provision, the startup and venture capital industry requested exemption of certain categories of foreign investors. The Central Board of Direct Taxes on May 24 released a list of categories of investors not covered by angel tax.

According to the notification, investments made by certain categories of residents of 21 countries will not attract angel tax. It includes entities registered under Category-I FPIs along with SEBI, endowment funds, pension funds and pooled investment vehicles.

Countries included in the list include Canada, Czech Republic, Belgium, Denmark, Finland, Israel, Italy, Iceland, Japan, Korea, Russia, Norway, New Zealand and Sweden, apart from the US, UK, Australia, Germany and Spain. This CBDT notification will be effective from April 1. Market experts said that by clearly mentioning these countries, the government has made it clear that its objective is to bring more foreign investment into India from countries with strong regulatory frameworks. However, the surprising thing is that the countries like Singapore, Ireland, Netherlands, Mauritius which bring the highest FDI in India are not included in this list.