Indian Start-ups Returning Home After Angel Tax Removal, Says DPIIT Secretary
By: Admin
January 11, 2025
Categories: TAX News
4 Min Read
The decision to abolish the angel tax has encouraged many Indian start-ups to return home by relocating their headquarters to India, according to Amardeep Singh Bhatia, Secretary of the Department for Promotion of Industry and Internal Trade (DPIIT).
Start-ups Embracing Reverse Flipping
Speaking to reporters on January 10, Bhatia said, “Start-ups are returning to India, and the removal of angel tax has played a significant role in this shift.” This phenomenon, known as reverse flipping, involves start-ups that had earlier registered their headquarters abroad moving back to India, driven by government efforts to improve the ease of doing business.
Companies like PhonePe, Groww, and Pepperfry have already completed the process of reverse flipping, while others, including Pine Labs and Razorpay, are reportedly in the process.
Angel Tax Abolished in FY25 Budget
Finance Minister Nirmala Sitharaman announced the removal of the angel tax for all classes of investors in the FY25 Budget, marking a major relief for the start-up ecosystem.
The angel tax, introduced in 2012, was initially aimed at preventing money laundering. It allowed taxation of funds raised by start-ups at valuations exceeding the fair market value of shares, as determined by a merchant banker. However, the provision was widely criticized for discouraging investments and creating hurdles for start-ups.
Boost for India’s Start-up Ecosystem
The abolition of the angel tax has been a long-standing demand from the start-up community. The decision aligns with the government’s broader initiatives to support entrepreneurship and attract businesses back to India.
“Removing the angel tax has made a significant difference in encouraging start-ups to bring their operations home,” Bhatia emphasized. This move is expected to bolster India’s position as a global hub for innovation and entrepreneurship.
As more start-ups embrace reverse flipping, the Indian start-up ecosystem is set to gain a stronger foothold both domestically and internationally.
