The trend that has gained a lot of attraction, especially in recent years is an investment.

Investment has become an essential part of wealth creation which helps to fulfill your
financial goals and stabilize your future financial savings. Instead of letting your money lie
idle in the bank account, there is various investment like stocks, equities, mutual funds, fixed
deposits, etc., that gives high returns. This article deals with start-up investment and various
benefits for investors who invest in startup companies.

Investment - Meaning:
Investing money or capital in order to gain profitable returns or as interest, income, or
appreciation in value is known as an investment. The greater growth of the potential of
investing is primarily due to the power of compounding and risk-return trade.

The person who puts money into an entity such as a business for a financial return is known
as an investor.

What is a startup company?

A startup company is a newly formed business that typically aims to grow its business by
innovative products and services. Generally, investors do not invest in such types of
companies as they involve a high rate of risk. Priorly, startup companies could raise money
through limited sources such as loans from banks, friends, family etc.

In India, Startup India Initiative was launched on January 2016 with the objective of
supporting entrepreneurs and promoting employment opportunities. The government of India
has authorized its ministries, departments, and public sector undertakings to relax norms in
all public procurements.

What is venture capital?

Venture capital is a form of private equity which is a type of investment that investors
provide to startup companies and small businesses in order to have potential growth.

Benefits for the investor investing in a Startup Company

In order to run a business or company, capital is an essential requirement for developing a
business. In the early stage of the venture, it is very difficult to generate revenue and
sometimes due to insufficient funds business may lead to failure. In this scenario, startups
seek investment in exchange for equity.

Angel investments are typically the earliest equity investments that are made in a startup
company. The Securities Exchange Board of India has defined an 'Angel fund' as a sub-
category of Venture Capital Fund under the Category ‘Alternative Investment Fund’ that
raises funds from angel investors and
invests in accordance with the provisions of Chapter III-A of AIF Regulations.
In case of an angel fund, it shall only raise funds by way of issue of units to
angel investors. "Angel investor" means any person who proposes to invest in an angel fund
and satisfies one of the following conditions, namely,
(a) an individual investor who has net tangible assets of at least two crore
rupees excluding the value of his principal residence, and who:
(i) has early-stage investment experience, or
(ii) has experience as a serial entrepreneur, or
(iii) is a senior management professional with at least ten years of
experience.

Angel investors are allowed to invest in businesses that have been incorporated in India to
avail of tax benefits.

After 2019, the Indian government has introduced benefits for investors who invest in startup
companies. After the issue of shares, the aggregate amount of paid-up share capital and share
premium should not exceed Rs. 25 crores.

As per the income tax notification, angel investors with a minimum net worth of INR 2 crore
or an average returned income of more than INR 25 lakhs in the previous three financial
years will be e eligible for 100% tax exemption on the investments.

Union Budget 2023-2024 on startups

Recently, in the Union Budget for 2023-2024, finance minister Nirmala Sitharaman has
announced that the date of incorporation for startups to avail tax benefits has been extended
by a year March 31, 2024, and the tax incentives will be applicable to startups in the first 10
years of incorporation, increased from seven years earlier.

Conclusion:

The Indian government has taken a number of measures for startup companies. India is now
the third largest ecosystem for start-ups throughout the world.