Under the existing norms, only investments by domestic investors or residents in closely held companies were taxed in excess of the fair market value.
The government had brought foreign investment in unlisted companies except for DPIIT recognized startups under the angel tax net in the budget.
The Finance Ministry has notified 21 countries, including the US, UK and France, from where non-resident investments in unlisted Indian startups will not attract angel tax. However, the list does not include investments from countries such as Singapore, the Netherlands and Mauritius.
The government had brought foreign investment in unlisted companies except for DPIIT recognized startups under the angel tax net in the budget. Subsequently, the startup and venture capital industry sought exemptions for certain foreign investor classes.
The Central Board of Direct Taxes (CBDT) on May 24 notified categories of investors who would not be covered under the angel tax provision. As per the notification, the excluded entities include those registered with SEBI as Category-I FPIs, endowment funds, pension funds and broad-based pool investment vehicles in 21 specified countries including the US, the UK, Australia, Germany and Spain. countries residents. ,
Other nations mentioned in the notification are Austria, Canada, Czech Republic, Belgium, Denmark, Finland, Israel, Italy, Iceland, Japan, Korea, Russia, Norway, New Zealand and Sweden. The CBDT notification has come into effect from April 1.
By explicitly mentioning this list of countries, the government aims to attract more foreign investment (FDI) to India from countries that have a strong regulatory framework, said Rakesh Nangia, chairman, Nangia Andersen India. Nangia said, “It is surprising that countries like Singapore, Ireland, Netherlands, Mauritius etc. from where most of the FDI flows into India are not mentioned in this notification.”
He added that stakeholders may still have to hold their horses on a formal notification on valuation guidelines as the rules are proposed to be issued after a stakeholder consultation process. CBDT is expected to come out with valuation guidelines for valuation of non-resident investment in unrecognized startups for the purpose of levy of income tax.
Under the existing norms, only investments by domestic investors or residents in closely held companies were taxed in excess of the fair market value. This was commonly known as an angel tax. The Finance Act, 2023 states that such investments over and above the FMV will be taxed whether the investor is a resident or a non-resident.
Following the proposed amendments to the Finance Bill, concerns have been raised over the method of computing fair market value under two different laws.
(This story has not been edited by News18 staff and is published from a syndicated news agency feed – PTI,
