With the intention to encourage funding by Indian investors, Government has decided to scrap tax on seed funding provided to startups by Indian angel investors in the upcoming Union Budget.
The tax provision treats infusion of seed money as income and incidentally, India is only country in the world to have such a system.
This tax is taken only from domestic investors and takes away 30% of the investment from the startups.
Startup India Action Plan will be unveiled by Narendra Modi on Saturday which is expected to ease all these regulations, thus creating a friendly startup ecosystem.[source]