New Angel Tax Rules For Valuing Investments In Unlisted Start-Ups

The amended rules are aimed at bridging the gap between the rules outlined in FEMA and the income tax.

The Income Tax Department has notified new angel tax rules that comprise a mechanism to evaluate the shares issued by unlisted startups to investors.

While previously the angel tax - a tax levied on capital received on the sale of shares of a startup above the fair market value - applied only to local investors, the Budget for the 2023-24 fiscal (April 2023 to March 2024) widened its ambit to include foreign investments.

As per the Budget, the excess premium will be considered as 'income from sources' and taxed at the rate of up to over 30 percent.