1. Home
  2. Blog
  3. UPSC

ANGEL TAX


Why is it in the news?

  • Recently, the Indian government has eased some of the provisions of the angel tax introduced in this year’s Budget.
  • The changes pertain to investments into startups by non-resident investors at a premium over their fair market value.

More about the news

  • The Central Board of Direct Taxes has amended Rule 11UA under the Income Tax Act, bringing some relief to prospective foreign investors in startups.
  • The amendments introduce five different valuation methods for shares and offer a 10% tolerance for deviations from accepted share valuations.
  • Previously, equity shares could only be valued based on Net Asset Value (NAV) and Discounted Free Cash Flow methods.
  • These changes provide more flexibility to merchant bankers for the valuation of startup companies.
  • The option to value equity shares using any of the five methods is not available to resident investors.
Angel Tax

·       The provision known as the ‘angel tax’ was initially introduced in 2012 to discourage the generation and utilization of unaccounted money through investments in closely held companies.

·       It is the tax that must be paid on the funds raised by unlisted companies through the issuance of shares in off-market transactions, if they exceed the fair market value of the company.

·       Fair market value (FMV) is the price of an asset when buyer and seller have reasonable knowledge of it and are willing to trade without pressure.


Get free UPSC Updates straight to your inbox!

Get Updates on New Notification about APPSC, TSPSC and UPSC

Get Current Affairs Updates Directly into your Inbox

Discover more from AMIGOS IAS

Subscribe now to keep reading and get access to the full archive.

Continue reading

WhatsApp Us

Exit mobile version