Those earning Rs 2-5 crore will pay effective LTCG of 26% and those earning less than Rs 5 crore will have to pay LTCG of 28.5%
Even as the government made an effort to bury the angel tax, the rise in surcharge on long term capital gains (LTCG) tax has smitten start-up investors, founders and stock options holders.
If they are earning Rs 2-5 crore per annum, which many of them do, the effective LTCG tax rate is 26 per cent (see table); those earning Rs 5 crore+ will have to pay 28.5 per cent LTCG. This will discourage start-up investors and dampen the spirits.
“The most retrograde step Modi Sarkar 2.0 has taken for start-ups is the heavy tax on their potential long term gains. A bit worried about the future,” tweeted Anand Lunia, managing partner at venture capital firm India Quotient.
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In a series of tweets, Ritesh Banglani, partner at Stellaris Venture Partners explained why a higher tax burden creates a massive dis-incentive for investors thinking of investing in startups. “If you’re an angel investor, would you rather invest in a start-up at 29 per cent LTCG or in real estate where you can avoid LTCG altogether?”
Source: Business Standard
