Startups and Investors Await Modi 3.0’s Union Budget 2024 with High Expectations

By Sunil Sonkar
2 Min Read
Startups and Investors Await Modi 3.0's Union Budget 2024 with High Expectations

Indian Union Budget 2024 announcement is approaching. The startup ecosystem and investor community are expecting something favorable. They are looking ahead the scrapping of contentious angel tax and launching of some new schemes by the government to boost domestic investments.

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One of the most important issues in the upcoming budget is the angel tax. It is a policy that has long been a thorn for as well as and investors. It was introduced in 2012 under Section 56(2) VII B of the Income Tax Act and basically targets unlisted companies raising capital from domestic investors at such prices which exceeds fair market value of the company. The excess amount is treated as income and it is taxed at a rate above 30%. The intention of it was to curb tax avoidance. However, it created an environment of unnecessary scrutiny for venture capital fund managers.

Artha Venture Fund managing director Anirudh A Damani emphasized that the angel tax has been a significant deterrent for domestic and international investors. It led to a cautious approach to funding early-stage startups. Removing the tax would create a more attractive investment environment in the country and it would simultaneously encourage the flow of much-needed capital into the startup ecosystem.

The Department for Promotion of Industry and Internal Trade (DPIIT) has already recommended removal of it. However, a complete repeal may not be witnessed in the budget. But incremental reforms could substantially improve the investment landscape.

Meanwhile, foreign investments have been dwindling in recent years and the startups are looking to the government for support. A Fund of Funds scheme is highly anticipated and similar to the Rs 10,000 crore initiative that was launched by the Small Industries Development Bank of India (Sidbi) in 2016.

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