Startup ecosystem · Tax
Angel tax abolished: what changed from April 2025
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Facts
Section 56(2)(viib), the "angel tax", taxed share premium received by unlisted companies at 30.9% when shares were issued above fair market value. This effectively taxed Indian startups for raising money at high valuations.
Provisions and law
- IT Act, Sec 92 (old 56(2)(viib)) | Finance Act 2024
Analysis
Finance Act 2024 abolished angel tax entirely from April 1, 2025. All investors, resident and non-resident, can invest at any valuation without triggering Sec 92, Income-tax Act 2025 (old Sec 56(2)(viib)) tax on the startup. What still matters: Sec 102 (old Sec 68; unexplained cash credits) is still very much alive. The Sec 102 (old Sec 68) documentation requirements (investor's PAN, ITR, bank statement) are now more important than ever, they are the remaining defence against IT dept scrutiny of investments.
Conclusion
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