Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
The short history
Angel tax originally taxed share premium received from resident investors. The Finance Act 2023 extended it to non-resident investors from 1 April 2023, which worried startups raising from abroad. The Finance Act 2024 then abolished Section 56(2)(viib) entirely from AY 2025-26. Confirm the position for your year of issue per the latest Finance Act.
What still matters for foreign money
Angel tax going away does not remove valuation discipline for foreign investment. Under FEMA pricing rules you must still issue shares to a non-resident at or above fair value, and the investor side has its own rules. So a valuation report is still needed.
A worked example
Take a startup raising from a foreign fund in 2026. It no longer faces angel tax on the premium, because Section 56(2)(viib) has been abolished. But it still needs a valuation certifying the price is at or above fair value under FEMA, and it must file FC-GPR with the RBI within 30 days of allotment. In other words, the compliance that protects the inbound foreign exchange has not gone away — only the income-tax charge on the premium has. Founders sometimes read ‘angel tax abolished’ as ‘no paperwork for foreign rounds’, which is the wrong takeaway and can lead to a late or missing FC-GPR and avoidable late fees. Treat the valuation and RBI reporting as non-negotiable parts of any non-resident raise. See foreign investor compliance for the full checklist, and our startup service can run the round end to end.