Angel Tax and Capital Gains Tax

News: Amid a sharp decline in funding for startups, Indian Industries has sought the removal of Angel Tax and revision of Capital Gains Tax.

About Angel Tax:

• Angel tax is levied on startup funds exceeding the fair market value at a 30% rate.
• Introduced under Section 56(2)(viib) of the Income Tax Act in 2012, it aims to prevent laundering of unaccounted money via unlisted firms.
• The tax applies to investments in private businesses and startups.
• This measure ensures accountability in capital investments.

About Capital Gains Tax (CGT):

• Capital gains are profits from the sale of any capital asset like land, buildings, vehicles, patents, trademarks, leasehold rights, and machinery.
• These profits are categorized as income and are therefore taxable.
• The tax applies to both individuals and businesses.
• This measure ensures revenue generation from asset sales.
• Compliance with tax laws is mandatory for all capital gains.

• Types of CGT:
  • Short-term CGT:
    • Asset held for less than 36 months (24 months for immovable properties).
  • Long-term CGT:
    • Asset held for over 36 months.
    • Special Cases: Preference shares, equities, UTI units, securities, equity-based mutual funds, and zero-coupon bonds are considered long-term if held for over a year.