ANGEL TAX

 

Angel Tax

Why In News?

Union Budget 2024-25 announces the scrapping of angel tax for all investors. while presenting the Union Budget 2024-25 in Parliament today. She added that this move is aimed to bolster the Indian start-up eco-system, boost the entrepreneurial spirit and support innovation.

What is Angel Tax?




Angel tax was levied on the capital raised via the issue of shares by unlisted companies from an Indian investor if the share price of issued shares exceeded the fair market value of the company. The excess funds raised at prices above fair value were treated as income, on which tax was levied. The tax derives its genesis from section 56(2) (viib) of the Income Tax Act, 1961. It was first introduced in 2012 to prevent black money laundering through share sales. It was levied at a rate of 30.9% on net investments in excess of the fair market value.

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