The statutory repeal of the controversial 'Angel Tax' under Section 56(2)(viib) marks a revolutionary shift for Indian venture capital and private equity funding. Analysis of its application to pending assessments, Rule 11UA valuation reports, and ongoing Section 68 scrutiny safeguards.
Step-by-step advisory measures prescribed by ASGR and CO for immediate adherence:
For over a decade, Section 56(2)(viib) penalized closely held companies that issued shares at a price exceeding the Fair Market Value (FMV), treating the excess premium as taxable 'Income from Other Sources'. Its abolition removes an enormous friction point for Indian entrepreneurs seeking early-stage venture backing.
While Angel Tax is gone, the Assessing Officer retains the jurisdiction under Section 68 to examine the 'source of the source' of share capital. Startups must maintain documented KYC and bank proofs of their angel investors to avoid adverse additions under Section 115BBE.
Senior Partner & Co-Founder • B. Com, FCA, CS Inter, FAFD (ICAI)
ASGR and CO, Chartered Accountants (Peer Review Certified: #018Xxx)
Statutory Disclaimer: This publication is compiled by ASGR and CO solely for general informational and educational purposes to assist corporate clients and peers in understanding statutory notifications. It does not constitute legal, tax, or formal secretarial advice. Before acting upon any provisions, specific professional counsel should be sought.
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