HNI wealth · AIF
Angel fund: investing in startups through an AIF
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Facts
Angel funds are a sub-category of Category I AIF with lower minimum (₹25L vs ₹1Cr for main AIFs). They invest in startups, typically pre-seed to seed stage. SEBI angel fund regulations allow investments between ₹25L and ₹10Cr in a single startup.
Provisions and law
- SEBI AIF Regulations, Angel Fund (sub-category of Cat I) | Min investment ₹25L
Analysis
Tax: Pass-through. LTCG on startup exits (24+ months) at 12.5%, assuming the startup was held as unlisted equity and appreciated to IPO/acquisition exit. Most startup investments fail, losses set off against other capital gains. Angel tax abolition: Angel tax (Sec 92, Income-tax Act 2025, old Sec 56(2)(viib)) abolished from April 2025. Startups can now raise at any valuation without the startup being taxed on share premium, removing a major impediment for angel fund investments.
Conclusion
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