Angel Tax (s.56(2)(viib)) Fully Repealed for All Investors from AY 2025-26

Finance Act 2024 — Repeal of s.56(2)(viib) Angel Tax on Foreign Investment

Finance Act 2024 deleted s.56(2)(viib) entirely from AY 2025-26 onwards. Angel tax — which taxed share premium received at above Fair Market Value as 'income from other sources' — is abolished for both Indian and foreign investors.

Issued: 2024-07-23
Effective from: 2025-04-01
Act: Income Tax Act 1961 s.56(2)(viib)

What it says

Complete deletion of s.56(2)(viib)

Section 56(2)(viib) of the Income Tax Act — which taxed the excess of consideration over FMV of shares issued by closely-held companies as income — has been deleted by Finance Act 2024 with effect from AY 2025-26 (i.e., for shares issued on or after 01-Apr-2024).

Applies to Indian AND foreign investors

Previously (since Finance Act 2023), angel tax applied to foreign investors too (with Rule 11UA prescribed methods). The repeal removes angel tax for all categories of investors — domestic and foreign.

AY 2024-25 and earlier: old rule still applies

For shares issued before 01-Apr-2024, s.56(2)(viib) still applies for AY 2024-25 and earlier. If a startup received FDI before 01-Apr-2024 at above FMV without DPIIT exemption, the old tax position must be reviewed.

DPIIT exemption (historical context)

Prior to repeal: DPIIT-recognised startups were exempted from angel tax via CBDT Notification 13/2019 (for Indian investors) and Notification 29/2023 (for foreign investors). These exemptions are now redundant since the tax itself is gone.

Supersession chain

Supersedes: cbdt-notification-29-2023 (DPIIT startup exemption), cbdt-notification-6-2023

Affected forms and returns

ITR-6 (Schedule OI)
Form 3CB-3CD (Form 3CD Clause 14 — s.56 receipt)

⚠ VERIFY

Whether any pending angel tax notices/assessments for AY 2024-25 and earlier are affected by the repeal — the repeal is prospective from AY 2025-26. Old assessments for FY 2023-24 and before are NOT cancelled. If you have a pending 143(3)/144 order or appeal relating to angel tax for earlier AYs, the repeal does not extinguish that liability. Confirm with your tax advisor.

Primary source

Finance Act 2024 — Repeal of s.56(2)(viib) Angel Tax on Foreign Investment — issued by Parliament of India under Income Tax Act 1961 s.56(2)(viib)

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