Abolition of angel tax phenomenal move in boosting startup ecosystem, says TiE Silicon Valley

Washington: Welcoming the abolition of angel tax by Union Finance Minister Nirmala Sitharaman in her annual budget presentations, a top Silicon Valley entrepreneur and venture capitalist on Wednesday described it as a phenomenal move that will increase the activity of angel investing in the India-US corridor.

“I think that (abolition of angel tax) is definitely a great first step and one would have not expected anything less than Finance Minister (Nirmala) Sitharaman’s move. She always seems to be so in tune with what is important for the country, with what is important to fuel the growth,” TiE Silicon Valley president Anita Manwani told PTI in an interview.

“If you look across the world, what is happening is this increased interest in entrepreneurship, more and more young people with not just in the technology areas, but in services, in manufacturing and other areas are, venturing into entrepreneurship. I think that India, especially with the varied economies and with the rising youth and middle class in second tier cities, needs these kinds of laws where angel investors are exempt from taxes,” she said.

“It also lowers the burden and truly frees the entrepreneur to focus on their business rather than the compliance issues, figuring out how do you now get accountants to figure out valuations at different points, submit paperwork. This has been a phenomenal move in this budget and hopefully it will also perhaps increase the activity of angel investing in the India-US corridor,” Manwani said.

The abolition of angel tax has been welcomed by several other trade and business advocacy groups as well.

The abolition of the angel tax across all investor classes marks a landmark reform benefiting India's startup ecosystem. This important reform will stimulate increased startup funding from both domestic and international sources, the US India Strategic and Partnership Forum said.

“Abolishing the angel tax clears an obstacle to ever closer bilateral technology cooperation and innovation,” said US India Business Council. “The abolition of the angel tax is a landmark decision for the start-up ecosystem in India. This was a much-needed course correction. This bold step will foster a more vibrant start-up ecosystem in India, leading to increased innovation, employment generation and competitiveness,” USA India Chamber of Commerce president Karun Rishi told PTI.

Abolition of angel tax was a long pending demand of venture capitalists and entrepreneurs from the Silicon Valley.

“Now, I think that you truly have provided the access to the entrepreneurs, but also provided the access to the angel investors to not just invest, but to play a more active role of shepherding, guiding those entrepreneurs, which is really what you need for their future growth into global markets,” Manwani told PTI.

“I think that we're going to see many more unicorns from India. … You can't keep track of the number of startups that are coming up in cities like Bangalore, Hyderabad, Delhi, even Bombay in the fintech areas, Gujarat, GIFT City. There's just so much activity going on. Needless to say, we are in conversation with folks in Eastern India, beyond Kolkata, where we are talking about how we fuel and foster entrepreneurship in those regions. So clearly this is, you know, The E of entrepreneurship has become just everybody's mantra right now,” she said in response to a question.

Manwani felt the need for reforms in the repatriation sector as well.

“Repatriation is always something that's top of mind of most non-resident Indians and investors, even if not of Indian origin. That is something that has to be clearer and easier. If those aspects could be solved, it would be painless. Today, anybody can pretty much invest in the US and you follow the same kind of rules and regulations of repatriation. And I think that in India, it seems complex,” she said.

“The complexity is perhaps the paperwork is still not completely easy. Even to sell stock, simple things like demat accounts, you can receive stocks in your DMAT accounts, you can sell it, but you cannot repatriate that money in your DMAT account. All of this is completely a legal process. It's digital. It's these little, little things that I think are jarring points. Perhaps they're small enough that they're not getting addressed,” Manwani said.