Nirmala Sitharaman Eliminates Angel Tax, Simplifies Tax Provisions

Finance Minister Nirmala Sitharaman announced the abolition of angel tax for all investor classes in startups. She also introduced various tax amendments for e-commerce players and financial instruments pertaining to long-term capital gains, aimed at reducing uncertainty and promoting a favorable startup environment.

Finance Minister Nirmala Sitharaman on Tuesday announced the elimination of angel tax for all classes of investors in startups, a move aimed at bolstering India's entrepreneurial ecosystem.

In her Budget speech, Sitharaman also introduced several changes to tax rates for e-commerce platforms and certain financial instruments in the context of long-term capital gains.

"To boost the entrepreneurial spirit and support innovation, I propose to abolish the so-called angel tax for all classes of investors," she declared. The abolition is expected to create a more favorable environment for startups.

Sitharaman suggested simplifying I-T provisions for reopening and reassessment to minimize uncertainty and disputes. An assessment can now be reopened beyond three years if the escaped income is Rs 50 lakh or more, up to a maximum period of five years.

In search cases, the proposed time limit is six years before the year of search, as against the existing ten years. This change is anticipated to reduce tax-related uncertainties and disputes. Additionally, a 12.5% tax rate will be applied to long-term gains on financial and non-financial assets, and the TDS rate for e-commerce operators will be lowered from 1% to 0.1%.

(With inputs from agencies.)