How does the angel tax and the valuation methods prescribed under it affect startups operating in a highly unpredictable market? Here's a brief highlight from a fireside chat on decoding angel tax at LetsIgnite2023, India’s largest conclave for startup investors.
1) Angel tax is an albatross on the neck of every startup. Angel tax is applicable not on angels but on the startups raising money from angels.
2) This is why investments via AIF are a great vehicle because you are exempt from angel tax.
3) Startups should assess the pedigree of the investor's before taking their funds. It will make their due diligence process smoother because they need to provide investor details to the regulatory body.
4) There should be a repository of startups that have been served a notice on angel tax so the government can see the scale of the hurdle that angel tax imposes on the ecosystem.
5) Despite this, entrepreneurs in India continue to build. If you can build a business in India, you can build a business anywhere in the world.
Catch the complete discussion featuring Siddarth Pai, Founding Partner, 3One4 Capital; Vishal Chopra, Co-Founder and CEO, WeRize; and Sanjay Khan Nagra, Partner, Khaitan & Co.