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Overview The omission of Section 56(2)(viib), commonly known as the "Angel Tax" provision, marks a significant shift in India's taxation framework for share premiums received by companies. However, understanding the legal and regulatory developments surrounding this provision remains important, par
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Angel Tax, under Section 56(2)(viib), was a provision in India's tax law that taxed share premiums received by companies from investors at a rate higher than the fair market value of the shares.
Section 56(2)(viib), the 'Angel Tax' provision, has been omitted. However, understanding its implications for past assessment years remains important.
Retrospectively from April 1, 2023, certain foreign investors, including Category I FPIs, Endowment Funds, Pension Funds, and eligible pooled investment vehicles from 21 specified nations, are exempt. DPIIT-recognised startups are also exempt if they meet specific conditions and file a self-declaration.
Amendments to Rule 11UA propose five additional valuation methodologies for non-resident investments and introduce a 10% safe harbour threshold. This means if the share issue price is within 10% of the fair market value determined by Rule 11UA, it will be considered the fair market value.
No, specific categories of foreign investors and DPIIT-recognised startups are now exempt. However, investments from foreign corporate entities that do not qualify for these exemptions may still be subject to the provisions for past periods.
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