Angel Tax: Changed legal basis in India

In February, the Indian government published the new changes for startups.

India, as the fastest growing market for start-ups, aims to encourage investment in start-ups for the benefit of innovation and jobs. The changes reflect the government’s intention to promote start-ups and encourage investment in start-ups. In addition to broadening the definition of start-ups, the conditions for tax relief for investments have also been revised.

1. broadening the definition of start-ups
The period of recognition as a start-up has been increased from 7 years to 10 years after the company was founded. Alternatively, the start-up status remains if the company does not exceed an annual turnover of 1 billion INR (12 million €) (previously 250 million INR = 3.1 million €).

2. tax relief for start-ups
The tax allowance for capital contributions by Indian nationals for investments in start-ups, the so-called “Angel tax”, has increased from INR 100 million (€ 1.2 million) to INR 250 million (€ 3.1 million). In calculating the tax allowance, payments received from persons resident abroad, government-sponsored investment funds (AIFs Category I) and listed companies with a value of INR 1 billion (€ 12 million) or a turnover of INR 2.5 billion (€ 31 million) are no longer taken into account.

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