Angel Tax Exemption under Section 56(2)(viib) for Startups
Exemption from 'angel tax' under Section 56(2)(viib) of the Income Tax Act, so that consideration received for issue of shares above fair market value is not taxed as income, subject to prescribed conditions.
Eligibility
- DPIIT-recognised startup
- Aggregate paid-up share capital and share premium after the proposed issue does not exceed Rs 25 crore
- Startup must not invest, for 7 years from the end of the financial year of share issue, in specified assets per para 4(iii) of DPIIT Notification G.S.R. 127(E) dated 19 February 2019
- Filing of Form 2 declaration with DPIIT
How to apply
A DPIIT-recognised startup files a duly signed declaration in Form 2 with DPIIT to claim exemption from Section 56(2)(viib) of the Income Tax Act on consideration received for issue of shares exceeding fair market value.
Required documents
- DPIIT recognition certificate
- Form 2 declaration for exemption under Section 56(2)(viib)
Official sources
Verification notes
Verified via startupindia.gov.in. Conditions per DPIIT Notification G.S.R. 127(E) dated 19 Feb 2019: aggregate paid-up capital + premium not to exceed Rs 25 crore; 7-year restriction on specified investments. No monetary benefit cap, so maxValueInINR omitted. [AI-gathered from official sources on 2026-07-05; needs team review]