This is a Guide To Angel Tax On Startups which contains the CBDT Circulars, Notifications, Press Note, Instructions. It is available for download in pdf format
“Angel tax” refers to taxation of excess premium received by a closely-held company from a resident investor (i.e., consideration received in excess of fair market value of shares). Section 56(2)(viib) (Section) of the Indian Tax Laws (ITL) (popularly known as the “angel tax” provisions) is an anti-abuse provision which applies when a CHC issues shares (including preference shares) to a resident at a premium and receives consideration which is in excess of the FMV of the shares. The excess amount so received is deemed as income from other sources in the hands of the CHC in the year of issue of the shares
Rule 11UA of the Income Tax Rules (Valuation Rules) prescribes the valuation methodology for determining the FMV of various types of assets (including unquoted equity shares), not only for the purposes of the angel tax provision, but also for other anti-abuse provisions involving transfer of assets without consideration or at a value less than the FMV
The Central Board of Direct Taxes (CBDT) issued Order dated 30 August 2019 for setting-up of a dedicated cell for start-ups (“Start-up Cell”) to redress the grievances and address the various issues under Indian Tax Laws (ITL), including angel tax
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This article is a mere general guide to the subject matter. It is not professional advice. Please consult a professional for advice on the specific circumstances of your case.