What is Angel Tax?

Abolition of angel tax would be very beneficial for the Indian startups. But before I discuss the impact of angel tax on Indian startups, it would be appropriate to answer what is angel tax?

Angel Tax is a tax imposed on Indian startups receiving funding from angel investors on the fair market value. Angel tax in India before Union Budget 2024 was 30% of the fair value of the startups. Angel tax was introduced in the Union Budget 2012 by then Finance Minister Shri Pranab Mukherjee.

For example, if the fair value of a startup is Rs 1 crore and it raises Rs 1.5 crore from angel investors, the excess amount of Rs 50 lakh is subject to this tax.

What is Open Credit Enablement Network (OCEN)?

The government of India launched the Open Credit Enablement Network (OCEN) last year. It is an initiative in India aimed at democratizing credit access and fostering innovation in the financial ecosystem. It is a kind of a virtual credit marketplace which brings distributors, lenders, and borrowers together in one location. Basically OCEN is a set of protocols that enables seamless interaction between the lenders, loan service providers and borrowers by creating a standardized framework for credit underwriting, disbursement, and management for small-ticket financing with brief tenures by enabling distant lenders to conduct business in remote areas and permitting access to data from other sources.