Angel tax
What Angel tax means, where you will meet it and what it means for your business.
DefinitionAngel tax was income tax under Section 56(2)(viib) on the premium a startup received above fair value when issuing shares; it was abolished for all investors from FY 2024-25.
From 2012 the department could treat share premium above a company's fair market value as income of the company and tax it at 30%. Because early-stage valuations rest on future potential, this hit angel-funded startups hardest, and DPIIT-recognised startups needed a specific exemption to escape it. The Finance Act 2024 removed Section 56(2)(viib) for all investors, resident and foreign, from FY 2024-25 onward. What it means for you today: a valuation above book value no longer triggers tax on the company. You still need a valuation report from a registered valuer for issuing shares under the Companies Act, and foreign investment must follow FEMA pricing rules. Any notice for share premium received before April 2024 still needs a reply on its own facts.
Where you will meet this term
- Start-up India RegistrationFor a Pvt Ltd, LLP or registered partnership under 10 years old that wants DPIIT recognition and a shot at the 80-IAC tax holiday.from ₹4,999
- CFO ServicesFunded startups and growing companies that need a finance head for a few hours a week: runway, board packs, budgets and fundraise support, without a full-time hire.from ₹24,999/month
- Financial Projections & Business PlanFounders who need a 3 or 5 year financial model with stated assumptions, for investors, a bank, a grant or their own planning.from ₹24,999