Quick Summary
The Income-tax (Twenty first Amendment), Rules, 2023, also known as the Angel Tax Rules, were notified by the Central Board of Direct Taxes (CBDT) on September 25, 2023. These rules amend Rule 11UA of the Income-tax Rules, 1962, which provides for the valuation of unquoted equity shares for the purp
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FAQ :
The Angel Tax Rules, officially the Income-tax (Twenty first Amendment), Rules, 2023, were introduced by the Central Board of Direct Taxes (CBDT) on September 25, 2023. They amend Rule 11UA of the Income-tax Rules, 1962, concerning the valuation of unquoted equity shares.
Angel Tax is the popular term for the excess amount deemed as income from other sources when a company receives consideration for issuing unquoted equity shares that exceeds the fair market value of those shares, as per Section 56(2)(viib) of the Income-tax Act, 1961.
The new rules provide five different methods for determining the fair market value of unquoted equity shares, offering more flexibility. They also introduce a 10% safe harbour margin, which is intended to reduce the Angel Tax burden on startups and other companies receiving investments.
The rules are applicable to all cases where unquoted equity shares are issued on or after September 26, 2023.
These new rules were notified by the Central Board of Direct Taxes (CBDT).
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