As the Monsoon Session of Parliament approaches, scheduled from July 22 to August 12, all eyes are on the Union Budget 2024 presentation slated for July 23.

Venture capitalists and industry experts are rallying behind a crucial demand which is the removal of angel tax to further promote a more conducive environment for startups in India.

“Removal of Angel Tax has been a long-standing demand of the industry,” said Anil Joshi, Managing Partner at Unicorn India Ventures.

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He said that the stakeholders of the ecosystem have made representations to the Government, seeking a solution.

“In most cases, investments at early stages are made to young companies with limited resources. The current tax scrutiny discourages potential investors, hindering growth. We hope the Finance Minister addresses this in the upcoming Budget. Such a move would encourage more taxpayers to invest in this asset class,: said Joshi.

Manoj Agarwal, Co-founder & Managing Partner at Seafund, highlighted the need for simplifying the taxation framework.

“Simplifying the taxation framework for startups, ESOPs, and investors is essential,” he stated.

He added that in many European countries, tax benefits for investing in startups stimulate domestic investment.

“India could benefit similarly by addressing ‘reverse flipping’ issues and streamlining GST for funds. Removing angel tax would unlock domestic capital crucial for early-stage funding, especially in the current funding climate,” suggested Agarwal.

“The government can support through key measures such as reducing corporate tax rates for startups, simplifying tax filing procedures, and enhancing benefits under Section 80-IAC are important for propelling innovation and economic resilience,” said Harshit Aggarwal, CEO and Founder of Novamax Appliances.

He added that an important area of focus is the Goods and Services Tax, where a strategic reevaluation could potentially streamline operations, reduce compliance burdens, and enhance overall economic efficiency.

“Additionally, reforms in angel tax regulations are awaited eagerly which aim to create a more conducive environment for venture capital investment and startup funding. These steps will not only help with financial constraints but also aim to stimulate growth across sectors by creating a strong ecosystem for budding entrepreneurs,” he concluded.