Many Indian start-ups returning home buoyed by angel tax removal, says DPIIT Secy

The removal of angel tax was a long-standing ask from the start-up ecosystem.

Many start-ups are returning to India by shifting their headquarters back to the country buoyed by the decision to abolish angel tax, Amardeep Singh Bhatia, secretary to the Department for Promotion of Industry and Internal Trade (DPIIT) told reporters on January 10.

"Now, the report we are getting is that startups are returning to India, angel tax (removal) is one issue that has helped bring some of them back," Bhatia said.

Termed as reverse flipping, many Indian start-ups that initially preferred registering their headquarters abroad  are now returning to India due to government's initiatives around ease of doing business.

Firms like PhonePe, Groww, and Pepperfry are said to have completed the process of reverse-flipping, while others, such as Pine Labs and Razorpay, are reportedly still undergoing the process.

DPIIT Secretary attributed the decision to remove angel tax as one of the reasons behind startups returning to India to register their headquarters within the country.

Finance Minister Nirmala Sitharaman announced the decision to abolish angel tax for all classes of investors in the Budget for FY25.

The angel tax regime was originally started in 2012 as an anti-abuse measure to prevent money laundering. It mandated that a startup’s fundraise could be taxed whenever the funding round happened at a valuation more than the fair value of shares – as determined by a merchant banker.

The removal of angel tax was a long-standing ask from the start-up ecosystem.