Angel tax epitomizes exactly how unintended consequences can undo the best of intentions. Point 56(2)(viib) of one’s income tax code taxation the essential difference between the difficulty rates from unlisted ties and its particular reasonable market value (FMV), and that has to be dependent on a merchant banker possibly using publication well worth or discounted income means. Brought in 2012 as the a good measure to get rid of age group and you will flow of unaccounted money”, it arose on account of popular governmental leader’s business receiving unaccounted share advanced out-of ? 277 crore.

Because the 2016, so it section has been aggressively misapplied to Indian startup’s elevating finance regarding buyers. It absolutely was entitled angel taxation whilst used priily offices exactly who invested in startups. In spite of the label, it absolutely was put on startups and not new buyer. The brand new effect is limited generally to early-stage startups as most of the main city when you look at the later amount comes out of foreign financing.