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Angel Tax (Legacy) — Sec 56(2)(viib) Calculator.

Angel tax was abolished for every share issuance from 1 April 2025 — this tool has no forward-looking use. What it still does: test a pre-1 April 2025 issuance for exposure, for a legacy-year audit or an open assessment relating to AY 2013-14 through AY 2025-26.

Abolished, not a live compliance concern

Section 56(2)(viib) no longer applies to ANY share issuance from 1 April 2025 onward, for resident or non-resident investors alike. Do not use this tool to plan a current or future fundraise — there is nothing to plan around. It exists only to help test issuances that happened before that date.

Inputs — the share issuance being tested

Date of share issuance

Issue price per share (₹)

Valuation method used (Rule 11UA)

Fair market value per share under the DCF method (₹)

Number of shares issued

DPIIT-recognised startup, with self-declaration filed?

Paid-up capital + share premium AFTER this issue (₹)

DPIIT exemption requires this to stay at or below ₹25 crore

Result

Rule 11UA(4) safe-harbour ceiling (FMV × 110%)₹132

Within the 10% safe harbour?No

DPIIT exemption available?Yes

Excess over FMV, per share₹30

Gross exposure (excess × shares issued)₹15,00,000

Angel tax applies?No — safe harbour or DPIIT exemption applies

Taxable amount (income from other sources, in the ISSUER's hands)₹0

A repealed provision, still open in old files.

Angel tax fell on the ISSUING COMPANY, not the investor — the excess of issue price over Rule 11UA fair market value was taxed as the company’s income from other sources. Statutory audits of startups with pre-2025 fundraising history, and CA firms handling open assessments for AY 2013-14 through AY 2025-26, are the only place this computation still matters.

Ind AS applicability calculator IT Act 2025 section mapper

How angel tax worked, and why it no longer applies going forward

Section 56(2)(viib) taxed a closely-held company on the excess of the price at which it issued shares over their fair market value, computed under Rule 11UA — either the Net Asset Value (NAV) method based on the balance sheet, or the Discounted Cash Flow (DCF) method certified by a SEBI-registered Category I merchant banker. The tax fell on the ISSUING COMPANY as income from other sources, not on the investor.

Two carve-outs kept many genuine fundraises out of the tax even while it was in force. Rule 11UA(4)'s safe harbour: if the issue price did not exceed 110% of the Rule 11UA fair market value, the issue price itself was accepted — no adjustment. The DPIIT startup exemption: a startup recognised by DPIIT, filing the prescribed self-declaration, was exempt provided its paid-up capital and share premium after the proposed issue did not exceed ₹25 crore.

The Finance (No. 2) Act 2024 abolished Section 56(2)(viib) entirely, effective 1 April 2025 (FY 2025-26 onward) — for every class of investor, resident and non-resident alike, and without the DPIIT/valuation conditions that previously gated relief. No share issuance from that date carries any angel tax exposure. The provision remains relevant only for issuances made before 1 April 2025, where open assessments for AY 2013-14 through AY 2025-26 (the period the provision was in force) are still being contested.

Worked example — pre-abolition issuance, within safe harbour

A DPIIT-recognised startup issued 50,000 shares at ₹150/share on 15 September 2024 (before the abolition date). DCF-method fair market value: ₹120/share. Paid-up capital + share premium after the issue: ₹18 crore.

Inputs

Safe-harbour ceiling₹120 × 1.10 = ₹132

Issue price vs ceiling₹150 > ₹132 — OUTSIDE the safe harbour

DPIIT test₹18 Cr ≤ ₹25 Cr — DPIIT exemption AVAILABLE

Output

Angel tax applies?No — DPIIT exemption applies despite failing the safe-harbour test

Taxable amount₹0

Failing the 10% safe harbour does not automatically trigger angel tax — the DPIIT exemption is a separate, independent carve-out. A company can fail one test and still be fully exempt through the other; both need to be checked before concluding exposure exists.

Common mistakes

Applying this calculator to a current or future fundraise

Angel tax does not exist for any issuance from 1 April 2025 onward. This tool has no forward-looking use — it exists only for testing issuances that happened before that date.

Assuming the safe harbour and DPIIT exemption are the same test

They are independent. A company can fail the 10% Rule 11UA(4) safe harbour and still be fully exempt via DPIIT recognition (subject to the ₹25 crore cap) — or vice versa. Check both before concluding exposure exists.

Taxing the investor instead of the issuing company

Angel tax under Sec 56(2)(viib) fell on the ISSUING COMPANY's income — not the investor. It is easily confused with Sec 56(2)(x), which taxes a RECIPIENT of property (including shares) received below fair market value in other, unrelated contexts.

Using NAV-method inputs for a DCF valuation or vice versa

The two Rule 11UA methods produce genuinely different fair market values from the same company's data — mixing figures computed under one method with a test meant for the other produces a meaningless comparison.

Frequently asked questions

Does angel tax still apply to startup fundraising in India?+

No. Section 56(2)(viib) was abolished by the Finance (No. 2) Act 2024, effective 1 April 2025, for all share issuances to all classes of investors — resident and non-resident alike. No fundraise from that date carries any angel tax exposure, regardless of valuation.

Why would anyone still need to compute angel tax exposure in 2026?+

Only for issuances made BEFORE 1 April 2025, in the context of a statutory audit covering an older financial year, or an open income-tax assessment or dispute for AY 2013-14 through AY 2025-26 — the period the provision was actually in force. It has no application to current or future transactions.

Who was taxed under the old angel tax provision — the company or the investor?+

The ISSUING COMPANY, on the excess of the share issue price over its Rule 11UA fair market value, taxed as income from other sources. The investor was not directly taxed under Sec 56(2)(viib) itself.

What was the Rule 11UA(4) safe harbour for angel tax?+

If the issue price did not exceed 110% of the fair market value computed under Rule 11UA (NAV or DCF method), the issue price itself was accepted for tax purposes — no adjustment, and no angel tax exposure, even though the issue price technically exceeded the computed FMV by up to that 10% margin.

Authoritative sources

Section 56(2)(viib) (as it stood before repeal), Rule 11UA, Income-tax Act 1961 — Abolition effective date (1 April 2025) verified 19 July 2026. Rule 11UA(4) 10% safe harbour and the ₹25 crore DPIIT exemption cap verified as the provisions that applied during the period the section was in force.

Always confirm against the latest version of the source. Regulations evolve and amendments are common.

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Last reviewed: 2026-07-19 · For informational purposes only — not professional advice.