(Representational image)
BENGALURU: Though various stakeholders have been suggesting excluding investments from foreign companies in startups from the angel tax regime, Finance Bill 2023 which was passed with major amendments on Friday, states that there is no change in the original proposal to angel tax and that it will come into effect from 1 April 2024.
The finance ministry's background note said that these changes will be for the assessment year 2024-25 and for FY 2023-24.
However, all concerns raised by stakeholders in the implementation of this proposal would be addressed, the finance ministry said.
"The draft rules related to valuation shall be shared with the stakeholders for their inputs in the next month itself, viz April. Exclusions, as already provided to domestic Venture Capital Funds etc, shall also be considered for similar overseas entities," it said.
ALSO READ | 'Angel Tax' provisions in Finance Bill will not impact startups: DPIIT Secretary
Venture capitalists have been saying that this will negatively impact funding for start-ups. The amendment in the Finance Bill, 2023, means there is no exemption for overseas investors and they need to pay a tax on deals. With the new amendment, if start-ups raise funding from non-resident investors, it will be considered as income and taxable.
"The startup ecosystem is already facing a funding winter for quite some time now. I believe that now Indian startups will find it more difficult to receive funding from foreign investors," said Vinod Shankar, Co-founder & Partner, Java Capital.
He also said that it might incentivise startups to locate overseas to avoid paying the tax.
