Is angel tax still applicable in 2026?

No. Angel tax under Section 56(2)(viib) was abolished for all classes of investors with effect from FY 2025-26 (1 April 2025) by the Finance Act 2024. New fund raises are no longer subject to angel tax.

Angel tax was a tax on the share premium an unlisted company received above the fair market value of its shares, taxed as income from other sources at around 30%. It often hit startups raising their first equity rounds.

Are old angel-tax cases still open?

Fund raises before 1 April 2025 can still attract angel-tax scrutiny for those assessment years, so older notices should be handled promptly. The abolition applies to new share issuances from FY 2025-26 onwards.

Startup India / DPIIT

Angel Tax Abolished: What It Means for Delhi Startups & Investors in 2026

Q: Do startups still need DPIIT recognition now that angel tax is gone?

Yes. Angel-tax exemption was only one DPIIT benefit. Recognition still unlocks the Section 80-IAC tax holiday, IPR rebates, self-certification, public-procurement access and government funding schemes, so it remains highly valuable.

By CA Kunal Mehta, FCAUpdated May 20266 min read

Angel tax abolished for startups in India

In short

Angel tax is gone. Section 56(2)(viib) — the provision that taxed startup share premiums above fair market value — was abolished for all classes of investors from FY 2025-26 (1 April 2025) by the Finance Act 2024. New fund raises are no longer hit by it. This is great news for Delhi founders raising capital. One caveat: fund raises before April 2025 can still face scrutiny for those years. And DPIIT recognition still matters — angel-tax relief was just one of its benefits.

For over a decade, "angel tax" was the most feared phrase in Indian startup fundraising. As of 2026, it no longer applies to new rounds. Here's what changed and what it means for raising money in Delhi NCR.

What was angel tax?

Under Section 56(2)(viib), when an unlisted company issued shares to investors at a price above the assessed fair market value, the excess premium was treated as "income from other sources" and taxed at roughly 30%. In practice this meant a startup could be taxed on the very capital raised to build the business — a serious drag on early fundraising.

What changed

The Finance Act 2024 abolished Section 56(2)(viib) for all classes of investors, effective FY 2025-26 (1 April 2025). So for any share issuance from that date, angel tax simply does not apply — whether the investor is a domestic angel, a foreign VC, or anyone else.

Why this is good for Delhi founders

No tax on capital raised — your funding goes into the business, not the treasury
Cleaner valuations — no need to defend share premium against a tax officer's FMV view
Easier foreign investment — a major friction point for FDI into startups is removed
Fewer disputes — one of the most litigated startup provisions is off the table for new rounds

The one caveat: legacy cases

The abolition applies to new share issuances from FY 2025-26 onward. Fund raises completed before 1 April 2025 can still be examined under the old rules for those assessment years. If you raised earlier rounds and receive a notice, deal with it promptly — the abolition doesn't automatically close older matters.

Does DPIIT recognition still matter?

Absolutely. Angel-tax exemption was historically one reason startups sought DPIIT recognition — but far from the only one. Recognition still unlocks:

The Section 80-IAC 100% income-tax holiday
IPR fast-tracking and big rebates on patent/trademark fees
Self-certification under select labour and environmental laws
Public-procurement relaxations and government funding schemes

See the full picture in Startup India benefits beyond tax, and get recognised via our DPIIT registration service.

This article is general information, not tax advice. Provisions are governed by the Income Tax Act and can change; consult an advisor for your specific situation.

How Startup Advisory Can Help

Startup Advisory is a CA-led firm in Saket, New Delhi that helps founders across Delhi NCR set up and recognise their startups so they can use benefits like the abolished angel tax and the 80-IAC holiday. We handle the structure and the paperwork that make those benefits real:

Company registration (Pvt Ltd) structured for fundraising from day one.
Startup India (DPIIT) recognition to unlock tax exemptions and easier compliance.
Guidance on valuation, share premium and funding documentation post the angel-tax repeal.
A named CA who supports you through every round of investment.

Call 9311972982 or book a free consultation to set your startup up for funding.

Frequently Asked Questions

No. Section 56(2)(viib) was abolished for all classes of investors from FY 2025-26 (1 April 2025) by the Finance Act 2024. New fund raises are no longer subject to angel tax.

A tax on the share premium an unlisted company received above fair market value, taxed as income from other sources at around 30%. It often hit startups raising their first equity rounds.

Yes. Angel-tax relief was just one DPIIT benefit. Recognition still unlocks the 80-IAC tax holiday, IPR rebates, self-certification, procurement access and funding schemes.

Fund raises before 1 April 2025 can still attract scrutiny for those years, so older notices should be handled promptly. The abolition covers new share issuances from FY 2025-26.

Yes. The abolition applies to all classes of investors – domestic angels, resident and non-resident investors, and foreign venture funds alike. The earlier widening that had brought non-residents into angel tax is now moot for issuances from FY 2025-26.

For purely domestic rounds, a fair-market-value report is no longer needed to avoid angel tax, since the section is gone. However, when you issue shares to non-residents, FEMA pricing guidelines still require a valuation, so do not skip valuation entirely.

No. Angel tax under Section 56(2)(viib) was a charge on share premium. The Section 80-IAC tax holiday is a 100% deduction on business profits for DPIIT startups. They are separate provisions – one is now abolished, the other still applies.

Yes. The provision applied to share issuances above fair market value, including equity and compulsorily convertible preference shares, and that charge no longer applies to such issuances from FY 2025-26 onward.

Yes. Section 68, which can tax unexplained share capital where the identity, creditworthiness and genuineness of investors are not established, still applies. The angel-tax repeal does not remove the need to keep proper records of who invested and how.

No. Because the section has been repealed, there is no exemption to claim or declaration to file for new rounds – angel tax simply no longer applies to share issuances from FY 2025-26.

About the author: CA Kunal Mehta, FCA

Co-Founder & Chartered Accountant, Startup Advisory — Saket, New Delhi

CA Kunal Mehta is a Fellow Chartered Accountant (FCA) and a co-founder of Startup Advisory who focuses on the finance and growth side of a startup's journey — fundraising readiness, cash-flow planning, corporate tax and GST for founders across Delhi NCR.

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