Now that Angel Tax is Settled, Can India Truly be a Startup Nation?

There is a long way to go

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Angel Tax – Two words and a big pain to Indian Entrepreneurs.

However, it is time for startups to breathe at ease as angel tax is about to be a thing of past. As per media reports, the income tax department has notified about 120 startups that they are exempted of angel tax.

Business daily Livemint reported that about 150 firms had applied for tax relief of which 120 have received the tag of "startup'. The intimation was sent to startups in the last few days under a new scheme announced in February which brings an end the much talked about angel tax in the startup community.

On February 19 this year, the Department for Promotion of Industry and Internal Trade (DPIIT), in an announcement, broaden the definition of a "startup' and exempted investors and entrepreneurs from the so-called "draconian' angel tax. As per the new norms, an entity is a startup up to 10-years of its establishment and its turnover hasn't exceeded INR 100 crores.

Anuj Golecha, Co-Founder, Venture Catalysts says with the relaxation of angel tax norms, the government has given a major relief to startups. Earlier there were a lot of redundancies, stretched timelines, and red-tapism due to the procedures, which will now be eliminated.

"This move will further ensure a conducive environment and enable quick processes for budding entrepreneurs. These numerous measures have widened the scope of startups and eased investment in startups across the network, which is a very positive development," he said.

Even though the government has addressed the problem, investors are now keen to understand if they could implement the notification smoothly. Anil Joshi from Unicorn Ventures is sure these reforms will evolve and the government will actively keep making changes as system demands.

"However, if they are not implemented properly then I fear that angels may dissociate themselves from investments as no one wants to get into scrutiny for investment from tax paid income," he added.

What Next?

Now that angel tax have been relaxed and it will haunt fewer startups, can India truly be startup nation? Well, honestly – there is a long way to go.

Presently, India stands tall among the top countries as a startup nation. However, at the ground, the government and ecosystem have a lot of work to do to truly call India a startup nation.

From StartupIndia to DigitalIndia, there have been several initiatives that have been kicked off by the central government while on the other side even states have tried to nurture entrepreneurship in their regions. But often while discussing regulator related issues, we forget to seek Indian Inc's participation to develop the ecosystem.

"We need active participation from corporates to make the ecosystem more vibrant. They need to actively involve with startups for a solution and also actively scout for acquisition," Joshi says.

On the other hand, Lakshmi Potluri-CEO, DCF Ventures says the efforts of both the state and central government have started to show. Having said, rural and non-tech entrepreneurs still need a lot of nurturing and handholding to grow into scalable businesses.

"Entrepreneurs outside tier I cities with great ideas are yet to be tapped and nurtured as access to information/mentors is limited or nonexistent. The ecosystem should look at creating opportunities to showcase a variety of startups to the industry in different domestic, industry shows, global platforms, etc. Lastly, more cross border best practices exchange from successful ecosystems such as Israel, Germany etc., will be a wonderful opportunity and insight for those who are running such startup/entrepreneurship facilitation ecosystems," she adds.