Angel tax hit on Mauritius, Singapore likely to exasperate startup funding winter

The exclusive of jurisdictions like Singapore, Cayman Islands, Mauritius, and Netherlands, which attracts a bunch of Foreign Direct Investment (FDI) into Indian startups, from a white list of geographics that are relieved from tax angel provisions, could exacerbate the ongoing funding winter in the sector, as per the venture capitalists.

On May 24, the Central Board of Direct Taxes (CBDT) notified that investments from 21 countries will be exempt from angel tax. The countries include Austria, Australia, Belgium, Czech Republic, Canada, Denmark, France, Finland, Germany, and Iceland. The list has been extended by including countries such as Italy, Japan, New Zealand, South Korea, Russia, Norway, Spain, the United Kingdom, Sweden and the United States of America.

This move comes days after startup investors hailed the finance ministry’s proposals to exclude certain parties, like pension funds and sovereign wealth funds, from the ambit of the angel tax last week.

There were fears of prolonged investing winters as the exempted countries such as US and Austria also opted to invest in India via Mauritius, Singapore and the rest, as a part of their Asia strategy.