Return of Startups to India
Encouraged by the removal of the angel tax, several startups are relocating their headquarters back to India. This move is attributed to the decision outlined in Budget FY25, which abolished the angel tax or Section 56(2) VII B of the Income Tax Act.
Angel Tax Abolition
- Introduced in 2012 as an anti-abuse measure to prevent tax avoidance and curb money laundering.
- Taxed the difference when shares were issued at a price exceeding the fair market value (FMV) as income from other sources.
Impact of Government Initiatives
The government's focus on ease of doing business has led to a trend called reverse flipping, where Indian startups that initially set up headquarters abroad are moving back to India.
- The equity market is beginning to reflect the impacts of reverse flipping.
- The Ministry of Corporate Affairs has expedited the process to facilitate this movement.
Startup India Initiative
- Since its inception in 2016, the number of registered startups has surged to over 157,000 by the end of 2024 from approximately 400.
- Startups raised $155 billion in funding in 2024, compared to $8 billion in 2016.
- Generated over 1.7 million jobs in India.
International Interests and Collaborations
Countries like Saudi Arabia have expressed interest in India's Startup Mahakumbh event. The government is in discussions with various nations to enhance exposure for Indian startups.
