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Angel Tax Exemption & Documentation Checklist for Startups

Angel tax was abolished from 1 April 2024. For earlier rounds, check which exemption applied and what documentation to retain for any IT scrutiny.

Round details
Documentation checklist
0 / 8 completed
Rule 11UA valuation report
CA or merchant banker valuation report using DCF or NAV method, dated within 90 days of share allotment.
DPIIT recognition certificate
Download from Startup India portal. Must be valid on the date of allotment.
Private Placement Offer Letter (PAS-4)
Required if issuing to more than 50 persons in a financial year.
MGT-14 filing with ROC
Required for Board resolutions approving preferential allotment within 30 days.
PAS-3 return of allotment
File with ROC within 15 days of allotment.
FIRC / KYC for foreign investors
Required if any investor is foreign. FIRC proves remittance via banking channel.
Shareholders Agreement
Executed SHA with all investors. Not a statutory requirement but standard practice for due diligence.
Board and shareholder resolutions
Minutes of the board meeting and EGM/postal ballot approving the allotment.

Angel tax abolition: Finance (No.2) Act 2024, effective 1 April 2024. Pre-abolition exemptions: CBDT Notification 29/2023 (foreign funds), DIPP GSR 364(E) (DPIIT startups). Consult your CA for pre-2024 rounds.

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Frequently asked questions

Has angel tax been abolished in India?

Yes. Section 56(2)(viib) — the angel tax provision — was completely abolished by the Finance (No.2) Act, 2024, effective from Assessment Year 2025-26. Any shares issued on or after 1 April 2024 attract no angel tax. Rounds closed from this date onwards are fully exempt.

Can the Income Tax department still raise angel tax demands for rounds before April 2024?

Yes. Assessments for shares issued before 1 April 2024 can still be initiated within the limitation period (typically 3 years from the end of the relevant assessment year, extendable to 10 years in cases of income escapement). CAs should ensure historical documentation is in order.

What is the angel tax exemption for DPIIT-recognised startups?

DPIIT-recognised startups that issued shares before 1 April 2024 were exempt from angel tax under DPIIT notification S.O.1219(E), subject to conditions: startup must have been DPIIT-recognised at the time of share issue, and must have filed Form 2 with the IT department. The exemption applied regardless of investor category.

What documents should a startup retain for pre-April 2024 funding rounds?

Key documents: DPIIT recognition certificate (must have been valid at time of share issue), valuation report from a SEBI-registered Merchant Banker using DCF method, Form 56F filed with IT, board resolution approving the issue price, share subscription agreement, bank remittance certificate, and investor KYC documents.

Does the angel tax abolition apply to foreign investor rounds as well?

Yes. The abolition is complete and applies to all investor categories — domestic angels, foreign investors, HNIs, and institutional investors. There is no distinction. Any shares issued on or after 1 April 2024 are fully exempt from Section 56(2)(viib) for all investors.

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