The Classic Partners LLP
Angel Tax Exemption
Angel tax advisory and exemption support for startups in India. Angel tax under Section 56(2)(viib) has been abolished for fund raises from FY 2025-26, but legacy assessments and DPIIT recognition still matter — and we help you navigate both.
Talk to an Angel Tax ExpertWhat is Angel Tax Exemption?
Angel tax referred to the tax under Section 56(2)(viib) of the Income Tax Act on the premium a closely held company received when it issued shares above their fair market value. For years it created friction for startups raising funds, and DPIIT-recognised startups could claim an exemption subject to conditions.
Through the Finance Act, 2024, the provision was abolished for share issues from FY 2025-26 (1 April 2025), so new fund raises are no longer subject to angel tax. However, assessments for earlier years can still be open, and DPIIT recognition continues to unlock other benefits such as the Section 80-IAC tax exemption. Recognition is obtained via DPIIT tax exemption and Startup India.
Who Should Get Angel Tax Support?
- Startups with open angel tax assessments for years before FY 2025-26.
- Companies that raised funds at a premium in earlier years.
- Founders responding to valuation or angel tax notices.
- Startups planning fund raises who want clarity on current rules.
- DPIIT-recognised startups seeking the wider basket of tax benefits.
Our Angel Tax Exemption Services
Position Review
Assessing your angel tax exposure across past years.
Notice Response
Helping respond to angel tax and valuation notices.
Valuation Support
Coordinating fair market value documentation.
DPIIT Recognition
Securing recognition for the wider benefit basket.
Fund-Raise Advisory
Advising on the current post-abolition position.
Compliance Records
Keeping documentation robust for open assessments.
Why Choose The Classic Partners
- Current-law clarity on the abolition and what remains.
- Legacy-case support for open prior-year assessments.
- Valuation-aware advice for clean documentation.
- Wider benefits via DPIIT recognition.
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Frequently Asked Questions
Is angel tax still applicable in India?
No. Angel tax under Section 56(2)(viib) was abolished for share issues from FY 2025-26 (1 April 2025) through the Finance Act, 2024, so new fund raises are no longer subject to it.
What was angel tax?
It was the tax on the premium a closely held company received when issuing shares above their fair market value, charged on the excess as income, which heavily affected startups raising capital.
Do earlier-year angel tax cases still matter?
Yes. Assessments for years before FY 2025-26 can still be open and may lead to demands, so legacy positions and documentation remain important even after abolition.
How did the DPIIT angel tax exemption work?
DPIIT-recognised startups could earlier claim exemption from angel tax subject to conditions; while the levy itself is now abolished, DPIIT recognition still unlocks other tax benefits.
Does abolition mean DPIIT recognition no longer matters?
Not at all. DPIIT recognition remains valuable for benefits such as the Section 80-IAC tax holiday and other startup incentives, even though angel tax has been removed.
Can you help if I received an angel tax notice?
Yes. We help review your position, organise valuation documentation and respond to angel tax or valuation notices for the relevant assessment years.
Have an angel tax question?
Get clarity on the abolition, handle legacy assessments, and unlock DPIIT benefits.
Contact Us