Section 56(2)(viib)Funding
Angel Tax
(Section 56(2)(viib))
Definition
A provision that taxes startup funding received from Indian investors as "income from other sources" if the valuation exceeds the fair market value. Abolished for DPIIT-recognised startups.
Why founders care
If you raise from Indian angels without DPIIT recognition, the amount above your "fair market value" can be taxed as income. Apply for DPIIT recognition before your first angel round.
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