Angel Tax Exemption & Compliance
Angel tax under Section 56(2)(viib) has been abolished for all investor classes from April 1, 2025. We help startups close out legacy assessments and get the most out of the DPIIT benefits that remain.
Angel tax, levied under Section 56(2)(viib) of the Income Tax Act, 1961 on share premium received by an unlisted company in excess of fair market value, was abolished with effect from April 1, 2025, by the Finance (No. 2) Act, 2024, and does not appear in the Income Tax Act, 2025. This means any share issuance on or after that date carries no angel tax exposure for any category of investor. Assessments and demands relating to fund raises before April 1, 2025 can still be open and may need to be defended.
What our angel tax advisory covers
The abolition changes what matters going forward, but not everything is closed.
- Confirming that share issuances on or after April 1, 2025 carry no angel tax exposure, for resident and non-resident investors alike
- Reviewing and defending pending assessments or notices relating to fund raises before that date
- Maintaining valuation and share premium documentation as good practice even without a tax trigger
- Advising on which of the six-plus DPIIT recognition benefits still apply, since angel tax exemption was only one of them
- Structuring new fundraising rounds cleanly under FEMA pricing guidelines for non-resident investment
- Coordinating with auditors on Section 68 source-of-funds compliance, which remains relevant independent of angel tax
What changed, and what did not
Angel tax is gone, but related compliance areas remain relevant.
Post-April 2025 Fundraises
No angel tax liability on share premium for any investor class, resident or foreign, with no DPIIT exemption filing needed.
Legacy Assessments
Fund raises before April 1, 2025 can still face open angel tax proceedings for those earlier assessment years.
FEMA Pricing Rules
Foreign investment still needs to comply with FEMA's Non-Debt Instruments Rules pricing guidelines, independent of angel tax.
Other DPIIT Benefits
Section 80-IAC tax holiday, IPR fee rebates, self-certification and Seed Fund access continue regardless of the angel tax abolition.
Our process
From initial consultation to completion.
Timeline Review
Checking which of the organisation's fund raises fall before or after the April 1, 2025 abolition date.
Legacy Case Handling
Reviewing and responding to any pending angel tax assessments for earlier years.
Forward Documentation
Maintaining clean valuation and investment records for current and future rounds as good governance practice.
Benefit Mapping
Confirming which other DPIIT-linked benefits the startup should still be actively using.
Why angel tax history still matters for founders
What sets our approach apart.
Open assessments do not close themselves
A pending notice for a pre-April 2025 fundraise still needs a proper response even though the provision itself has been repealed going forward.
Clean valuation records remain good practice
Even without an angel tax trigger, defensible share premium documentation supports future diligence, audits and investor relations.
DPIIT recognition is still worth having
Founders sometimes assume DPIIT recognition lost its purpose once angel tax was abolished, when several other real benefits remain tied to it.
Angel Tax Exemption & Compliance questions answered
What people ask before engaging us.
Have an open angel tax matter, or planning a new round?
We will help you close out legacy assessments and structure new fundraises cleanly.
