India
India Scraps ‘Angel Tax’; Startup Investors Rejoice – Boost for Space Startups. In a landmark decision, India has abolished the controversial ‘angel tax’ imposed on investors funding its startups. This move, announced on Tuesday, is expected to significantly boost innovation. and attract increased funding for new businesses in Asia’s third-largest economy.
A New Chapter for Startups
Finance Minister Nirmala Sitharaman made the announcement during her budget speech, declaring, “To bolster the Indian startup ecosystem, boost entrepreneurial spirit, and support innovation, I propose abolishing angel tax for all classes of investors.” This decision addresses a long-standing demand from the startup community and follows several attempts by the government to simplify the tax system.
Previous Exemptions and Current Challenges
Previously, in 2019, the government had exempted startups registered with the Department for Promotion of Industry and Internal Trade from angel tax provisions. In 2023, further exemptions were introduced, removing the tax for certain foreign portfolio investors, domestic banks, insurance companies, and sovereign wealth funds. Despite these efforts, the startup industry has faced challenges in accessing growth capital. According to Venture Intelligence, private equity and venture capital investments in Indian companies fell by 24% in the first half of 2024 compared to the same period in 2023.
Reducing Tax-Related Litigation
The abolition of the angel tax is also expected to reduce the time and resources spent on tax-related litigation. It would provide a more favorable environment for startups and investors. This change signals the government’s commitment to creating a more conducive environment for innovation and growth.
Union Budget 2024: A Boost for Space Startups
In addition to scrapping the angel tax, the Union Budget 2024 includes a proposal for a Rs 1,000 crore Venture Capital (VC) fund. It is aimed at propelling India’s space industry. This initiative is part of the government’s plan to expand India’s space economy from $8.4 billion to $44 billion by 2033.
Encouraging Space Innovation
Space startups across various technology domains have hailed the VC fund as a critical measure for the sector. The fund aims to spur a new generation of space innovators and entrepreneurs, facilitating the growth of India’s space economy.
Lt. Gen. AK Bhatt (Retd.), Director General of the Indian Space Association (ISpA), welcomed the announcement, stating, “The proposal for the establishment of 12 industrial parks across India, we hope, will include the space sector, as this will provide a substantial boost to the space and satellite manufacturing industry.”
A Vision for Space Sector Growth
The Indian Government’s decision to invest venture capital into the space sector. It reflects its vision to achieve five-fold growth in the industry. Currently, the Indian space economy is valued at $9 billion. It represents a mere 2% of the $450 billion global space economy. With increased startup activity and commercial participation from larger conglomerates. The government foresees significant potential for growth.
The SatCom Industry Association of India has suggested that the government should offer tax incentives, provide regulatory clarity, and award contracts to startups. Anil Prakash, Director General of SIA-India, emphasized, “By enabling space sector manufacturing through Production Linked Incentives (PLI), addressing pending defense offset obligations, and streamlining procurement processes, we can ensure sustained demand and funding for our burgeoning space economy.”
