03/02/2019 Vajiram & Ravi - EdgeLMS

Angel tax is a term used to refer to the income tax payable on capital raised by unlisted companies via issue of
shares where the share price is seen in excess of the fair market value of the shares sold. The excess
realisation is treated as income and taxed accordingly. The tax was introduced in the 2012 Union Budget by
then finance minister Pranab Mukherjee to arrest laundering of funds. It has come to be called angel tax since
it largely impacts angel investments in start-ups.
Statement 2 is correct.
The government has put in place a mechanism for start-ups to secure exemption from the ‘Angel Tax’ with
retrospective effect. Start-ups with total investment including funding from angel investors up to Rs. 10 crores
can seek approval from an eight-member government board for exemption from tax. The investor must have
paid tax above Rs. 50 lakhs and should have net worth of more than Rs. 2 crores.

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