The Finance Ministry has notified 21 countries, including the US, UK and France, from where non-resident investment in unlisted Indian startups will not attract angel tax.

The list, however, excludes investment from countries like Singapore, Netherlands and Mauritius. The government had in the Budget brought overseas investment in unlisted closely held companies, except DPIIT recognised startups, under the Angel Tax net.

Following that, the startup and venture capital industry sought exemption for certain overseas investor classes.

The Central Board of Direct Taxes (CBDT) on May 24 notified classes of investors who would not come under the Angel Tax provision.

Excluded entities include those registered with Sebi as Category-I FPI, Endowment Funds, Pension Funds and broad-based pooled investment vehicles, which are residents of 21 specified nations, including the US, UK, Australia, Germany and Spain, as per the notification.

The other nations mentioned in the notification are Austria, Canada, Czech Republic, Belgium, Denmark, Finland, Israel, Italy, Iceland, Japan, Korea, Russia, Norway, New Zealand and Sweden.

The CBDT notification comes into effect on April 1.

Nangia Andersen India Chairman Rakesh Nangia said by explicitly mentioning this list of countries, the government aims to attract more foreign investment (FDI) into India from countries that have robust regulatory frameworks.

“Surprisingly, countries such as Singapore, Ireland, Netherlands, Mauritius etc from where the majority of inbound FDI is channelised into India, do not find a mention in this notification,” Nangia said.

Stakeholders may still have to hold their horses on a formal notification on the valuation guidelines as rules on the same are proposed to be released after a stakeholder consultation process, he added.