Union Budget 2024: Govt proposes to abolish angel tax for all investor class

Finance Minister Nirmala Sitharaman announced on Tuesday that the government will abolish the angel tax for all types of investors in startups. The abolition of the angel tax is anticipated to benefit startups by creating a more favourable environment for their growth.

In her Budget speech, Sitharaman also detailed various adjustments concerning tax rates for e-commerce companies and certain financial instruments related to long-term capital gains.

"First of all, to bolster the Indian startup ecosystem, boost the entrepreneurial spirit and support innovation, I propose to abolish the so-called angel tax for all classes of investors," she stated.

Additionally, Sitharaman proposed simplifying the Income Tax (IT) provisions for reopening and reassessment cases to minimise uncertainty and disputes.

During the February interim budget, a proposal was made by the FM to change the definition of “eligible startup” in the Startup India scheme in order to qualify for a tax holiday. This change would apply to startups that were established between April 1, 2016 and March 31, 2025.

"An assessment hereinafter can be reopened beyond three years from the end of the assessment year only if the escaped income is ₹50 lakh or more, up to a maximum period of five years from the end of the assessment year”, she added.

"Even for search cases, the proposed time limit is six years before the year of the search, compared to the current limit of ten years. This change aims to reduce tax-related uncertainty and disputes," she explained.

Moreover, she announced that long-term gains on both financial and non-financial assets will be taxed at a rate of 12.5%. Additionally, the TDS rate for e-commerce operators will be reduced to 0.1% from the current 1%.