Indian Government To Tax Angel Funding

kousik writes "The Indian Government proposes to tax Angel Investment as income and is asking start-ups to pay a 30% tax on the funding. From the article: 'Ravi Kiran, co-founder of middle-India advisory Friends of Ambition (FoA) and member of Indian Angel Network told Firstpost: “There seems to certainly have been an error in understanding on the part of the Budget makers. If this is pushed through, it will spell serious trouble for the angel investor and entrepreneurship space. I feel this is an error and should be corrected quickly before it leads to confusion.”'"

Comments

Re:Tax too high and it stops.

[bill_mcgonigle]

This idea stinks.

Not if you're the incumbent the startup is about to compete against. Cui bono.

India's Recent History

[Anonymous Coward]

After achieving independence, India tried to be a socialist state with a planned economy. Lots of their leadership was not merely socialist but Marxist. The planned socialist economy failed to improve life for nearly everyone there, but there are still lots of people in power who disapprove of capitalism and especially entrepreneurship. I think you'll find many in government who very much want to believe that the Angel Investors are in that top of that top 1% that deserves to be separated from their money and that they can easily afford a "mere 30%" tax. No matter that it will go to line the pockets of the bureaucrats rather than lift poor out of their poverty, something that India's economic "planners" have been unable to do since independence.

Re:Selling shares is debt, not income

[whoever57]

It's clear the legislators have zero clue what investment means.

True enough.

When a company receives startup funding, it is in exchange for ownership shares. That makes it borrowing, not income. Shareholder Equity offsets that funding on the balance sheet.

Now you are showing your ignorance. It's not a loan. It's not borrowing.

But the summary doesn't tell the whole story (I know, what a shock!):

There is a Budget proposal to tax at 30 percent any investment received by closely held companies where the aggregate investment exceeds the fair market value of shares.

Most likely, this is aimed at money laundering. The uncertainty caused by this and the possible corruption amonst those who enforce this are likely to stifle angel investment.