Angeltax- The Making and Unmaking of Startup India
V. M Salgaocar College Of Law, India
Volume II – Issue I, 2020
With the birth of Start-up India, we have witnessed an enormous pour of new companies coming up from different parts of the country.
Off late, Indian companies have seen huge investments. The investor societies across the world have come up with huge investments in the Indian market because of the sheer size of the market that is available in the second most populous country in the world.
However, over the past few months the economy has literally come to a standstill due to the ongoing Pandemic that has engulfed the entire world. All the businesses have become stagnant. But the recent announcement by PM Narendra Modi about “ATMANIRBHAR BHARAT” has come in as a harbinger of good hope charting the course for all the start-ups in the country.
With the institution of start-up India and ATMANIRBHAR BHARAT, the plan has indeed paved way for high net worth individuals, foreign funds, angel investors, venture capitalists, almost every possible individual or a company that is capable of investing has played a role in investing in various Indian Start-ups.
Looking at the present situation around the world and the significantly detrimental effect on the economy, Start-ups seems to be the only major source of revenue and employment. Government is ensuring that while it successfully facilitates the entrepreneurial dream of individuals by its flagship “ ATMANIRBHAR BHARAT” programme and a plethora of other schemes like ‘Start-up India’ it is also making sure that these opportunities are not taken for granted and entrepreneurs make full use of these schemes by being well within their rights.
While we have a great opportunity of Start-up India knocking at our doors. We need to look into the entire revolution of Star-ups, primarily talking about the Angel tax.
On one hand the scheme of Start-up will massively boost the economy, on the other hand we need to critically analyse the hindrance that entrepreneurs faced while trying to lay the foundation for their business. Angel Tax is one such speed breaker. Angel Tax was introduced by then Finance Minister Mr Pranab Mukherjee to tackle the malaise of generation and circulation of black money and its illegitimate transfer outside India in 2012.
The imposition of angel tax hinges on the fair market valuation of the company and this has been a bone of contention between Start-ups and the income tax department.
This this paper critically analyses the drawbacks of the Angel Tax and how it posed as a roadblock to all the potential entrepreneurs over the past few years until August 2019.
Keywords: Angel Tax, Angel Investors, Fair Market Value, General Anti-avoidance Rule (GAAR), Securities and Exchange Board of India (SEBI), Department for Promotion of Industry and Internal Trade (“DPIIT”).