Angel Tax In India: Everything You Need To Know

More commonly called as Angel Tax in the start-up world, it is the tax levied under Section 56(2)(viib) of the Income Tax Act 1961 (“the Act”), on the capital raised by privately held companies via the issue of shares to a resident, the consideration for which exceeds the face value and the Fair Market Value (FMV) of the shares issued. Angel tax gets its name from the wealthy individuals (“angels”) who invest heavily in risky, unproven business ventures and start-ups, in the initial stages when they are yet to be recognised widely.