India today addressed a long-standing challenge that has been affecting the country’s booming startup ecosystem. As part of a raft of measures to boost overall economic growth from a five-year low, Finance Minister Nirmala Sitharaman said New Delhi is exempting startups from Section 56(2) — a provision more popularly known as an “angel tax” in the local income tax laws — that required startups to pay a certain tax if they received an investment at a rate higher than their “fair market valuation.” Local tax authority in India does not recognize the discounted cash flow method that many investors use to value early-stage startups, and instead value the company for what it is worth currently, which as you can imagine, is very little.

 

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