Indian government abolished the angel tax last year and it resulted with a shift in the Indian startup ecosystem. The angel tax was seen as a major roadblock for startups for years. It was introduced in 2012 to curb money laundering through inflated share valuations, but it ended up taxing genuine startup investments.
One of the most encouraging outcomes of the decision is the trend of “reverse flipping.” Many Indian startups are now returning to India from abroad. Big names like PhonePe, Groww and Pepperfry have already made the move. Others like Razorpay and Pine Labs are in the process of shifting their headquarters to India.
The abolition of the angel tax is a policy change and also a signal that India is serious about becoming a global startup hub.
The policy change resulted with a funding of $155 billion in 2024. It is a promising step towards the way the policy shifts are paying off. Removing the angel tax was long-standing demand and fulfilling it has clearly set the stage for positive change.
However, this is just the beginning for India as it wants to sustain the momentum and the focus needs is to stay on reducing bureaucratic hurdles, improving access to capital as well as strengthening innovation.
The return of startups to Indian shores is of course a victory for the ecosystem, but it is also a victory for the country.
