The angel tax was initially introduced to curb money laundering and the use of black money. It taxed the capital raised by unlisted companies through the sale of shares above the fair market value, which was perceived as income and taxed accordingly. While the intent was to ensure transparency, it inadvertently created hurdles for startups seeking early-stage funding.
While the removal of the angel tax is a positive move for startups, the Budget also includes an increase in the Securities Transaction Tax (STT) and Long-Term Capital Gains (LTCG) tax. Here’s how this might impact stock market investing:
- Increased Trading Costs: Higher STT means higher costs for buying and selling securities, which could deter frequent trading.
- Reduced Returns: An increase in LTCG tax reduces the net returns on long-term investments, potentially making other investment avenues more attractive.
- Shift in Investment Strategies: Investors might shift their focus to tax-efficient investment options or hold investments for longer periods to minimize tax impact.
Do you think the removal of the angel tax, combined with the increase in STT and LTCG, will divert investors from the stock market to startups?