India exempts 21 countries from Angel Tax

The government has notified 21 countries, such as the US, UK and France, from which non-resident investment in unlisted Indian startups will not attract angel tax. However, the list does not encompass investment from countries such as Singapore, Netherlands and Mauritius. However, the list does not include investment from countries like Singapore, Netherlands and Mauritius.

The Central Board of Direct Taxes (CBOT) has notified classes of investors who would not come under the Angel Tax arrangement on May 24. As per the notification, exempted individuals include those registered as Category-I FPI, Endowment Funds, Pension Funds and broad-based pooled investment vehicles, which are residents of 21 specified nations, including the US, UK, Australia, Germany and Spain. As per the notification, exempted individuals include those registered as Category-I FPI, Endowment Funds, Pension Funds and broad-based pooled investment vehicles, which are residents of 21 specified nations, including the US, UK, Australia, Germany and Spain.

The other nations mentioned in the notification are Israel, Italy, Iceland, Japan, Korea, Russia, Norway and Sweden. The CBDT notification will come into effect on April 1.

By explicitly mentioning this list of countries, Nangia Andersen India Chairman Rakesh Nangia said that the government aims to attract more foreign investment FDI into India from countries that have robust regulatory frameworks. Surprisingly, countries such as Singapore, Ireland, Netherlands, Mauritius, India and other countries from where the majority of inbound FDI is channelised into India, do not find a mention in this notification, Nangia said. Surprisingly, countries such as Singapore, Ireland, Netherlands, Mauritius and other countries from where the majority of inbound FDI is channelised into India do not find a mention in this notification, Nangia said.

Stakeholders may still have to hold their horses on a formal notification on the valuation guidelines, as rules on the same are proposed to be released after a stakeholder consultation process, he said. The CBDT will come out with valuation guidelines for valuing non-resident investment in unrecognised startups for the purpose of levying income tax. The CBDT will come out with valuation rules for valuing non-resident investment in unrecognised startups for purposes of levying income tax.

Under the existing regulations, only investments by local investors or residents in closely held companies were taxed over and above the fair market value. The angel tax was commonly referred to as an angel tax. The Finance Act, 2023, has enshrined such investments over and above the FMV irrespective of whether the investor is a resident or non-resident. The Finance Act, 2023, has made clear that such investments over and above the FMV will be taxed irrespective of whether the investor is a resident or non-resident.

Under the amendments proposed in the Finance Bill, concerns have been raised over the methodology of calculating fair market value under two different laws.

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