Some shrewd, backroom lobbying over the past 15-odd months played a critical role in last week’s unveiling of the much awaitedinvestment framework for angel investors by SEBI. Yet, the framework, though ground breaking in several ways, doesn’t quite solve the original problem that led to its making. In fact, it leaves the country’s real angels — family members and friends, usually the first source of capital for an entrepreneur — a bit in the lurch. Angel investments made by family, friends or any individual not investing through a SEBI-registered angel fund, will still be subject to be taxed as income at the hands of the investee company. While that doesn’t spell the death of grassroots angel investing in the country, it certainly makes life that much more difficult for both entrepreneurs and their most genuine benefactors. There are ways around the problem and we’ll dwell on those in a bit. First, let’s talk about the events in the last 15 months that led to last Tuesday’s announcement. Making angels and startups part of the government’s lexicon Soon after the government announced in its March 2012 Union Budget that angel investments would be taxed, professional angel investor groups, in a rare display of solidarity, closed ranks to work around the problem. Several venture capital firms, who depend on these angel investor groups for deal flow, and a couple of industry representative bodies also threw their hats into the ring. Leveraging the public outcry that erupted following the Budget proposal, this lobby was…
