Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
What changed and from when
The provision is gone for share issues on or after 1 April 2024. This applies to all investors, including foreign investors who were brought into its scope earlier.
Older rounds still matter
If you raised before this date, angel tax can still be raised in assessment — keep your valuation and DPIIT exemption records for those years.
What still needs attention after abolition
Abolition simplifies new rounds but doesn’t erase every concern. For shares issued on or after 1 April 2024, there’s no Section 56(2)(viib) charge, so you don’t have to defend the premium against a fair-market-value benchmark for income-tax purposes — a real relief, especially for rounds raised on future potential. But three things still matter. First, older rounds (up to FY 2023-24) can still be examined in assessment, so keep the DPIIT recognition, the exemption declaration and the valuation report for those years as your defence. Second, valuation hasn’t gone away for other laws: a foreign investor’s pricing must still meet FEMA guidelines backed by a valuation, and the Companies Act still expects a defensible issue price. Third, other anti-abuse provisions (such as the taxation of a buyer who receives shares below fair value) remain. So while the headline angel-tax worry is gone for new issues, valuation discipline and good documentation are still part of any funding round. The net effect is a cleaner process for raising capital, not a removal of all compliance. Confirm the position for your specific year, since the change applies from a defined date.