Is angel tax still applicable in 2026?

No. Section 56(2)(viib) — angel tax — was abolished for all classes of investors with effect from FY2025-26. A premium raise no longer attracts it. Pre-abolition cases still continue under the old law.

Do I still need a valuation if angel tax is gone?

Yes. A Rule 11UA valuation is still required to support the issue price and is essential for FEMA pricing when foreign investors are involved.

What still has to be filed when I raise at a premium?

A Rule 11UA valuation, board/shareholder resolutions, PAS-3 within 30 days, MGT-14 where required, share certificates with stamp duty, and — for foreign investors — FC-GPR within 30 days plus the annual FLA Return.

Does abolition of angel tax remove FEMA reporting?

No. FEMA filings (FC-GPR, FC-TRS, FLA) are exchange-control obligations entirely separate from income-tax angel tax, and are unaffected by the abolition.

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Angel Tax Is Abolished — So What Actually Applies When You Raise at a Premium Now?

the compliance control room18 June 2026 · ComplianceStack

Angel tax (Section 56(2)(viib)) was abolished from FY2025-26. But raising at a premium still triggers a valuation, PAS-3, FC-GPR for foreign money, and more. Here's what survived the headline.

Angel tax — Section 56(2)(viib) — was abolished for all classes of investors from FY2025-26. A startup issuing shares above fair market value no longer pays tax on the premium. But "angel tax is gone" doesn't mean "raising at a premium is now paperwork-free." You still need a valuation, you still file PAS-3 and the share-certificate trail, and foreign money still triggers FC-GPR and FLA. Here's what survived the headline — and the one stale assumption to drop.

What actually changed

Angel tax was an income-tax charge under Section 56(2)(viib) on the share premium an unlisted company received above the fair market value of its shares. It created years of anxiety and disputes for startups raising at high valuations. The Finance (No. 2) Act, 2024 abolished it for all investor classes with effect from FY2025-26 — so a premium raise no longer attracts that charge, regardless of investor type or DPIIT status. (For the benefits angle, BenefitStack covers angel tax exemption after the 2024 abolition.)

One caveat: the abolition is forward-looking. Pending cases and assessments from before the effective date continue under the old law.

What did NOT change — and still fires on a priced round

Dropping angel tax removed one charge. It did not remove the corporate and exchange-control machinery of issuing shares. A priced round still triggers all of this:

You still need a Rule 11UA valuation

The premium is no longer taxed, but you still need a fair-market-value report under Rule 11UA to support the issue price — for the board, for the share-issue paperwork, and critically for FEMA pricing if any investor is foreign. The valuation didn't go away; only the tax on the premium did. (Sanity-check the methods with BenefitStack's Rule 11UA calculator.)

You still file PAS-3 within 30 days

The allotment must still be recorded with the MCA via PAS-3 within 30 days — see what a missed PAS-3 does at diligence.

Foreign money still triggers FC-GPR and FLA

If a non-resident invests, FC-GPR is due to the RBI within 30 days of allotment, and FLA recurs every 15 July — independent of anything that happened to angel tax. See the FEMA compliance guide.

Resolutions, share certificates and stamp duty still apply

Board and shareholder resolutions, issuing share certificates, and paying state stamp duty are all unchanged. (Full list in the post-raise filing checklist.)

The one stale assumption to drop

If your CA, your glossary, or an old checklist still treats "angel tax exemption" as something to manage at each round, update it. There's no exemption to claim because there's no tax to be exempt from. The energy that used to go into angel-tax valuations and Form 2 declarations should now go into the filings that did survive — especially the FEMA ones, which are where diligence actually bites.

Track what still applies, automatically

ComplianceStack's engine reflects current law — angel tax is out, and the obligations that remain (valuation, PAS-3, FC-GPR, FLA, share certificates) materialise as dated tasks when you record a round. Get your free compliance health check to see exactly what your raise triggers today.

FAQs

Is angel tax still applicable in 2026?: No. Section 56(2)(viib) — angel tax — was abolished for all classes of investors with effect from FY2025-26. A premium raise no longer attracts it. Pre-abolition cases still continue under the old law.
Do I still need a valuation if angel tax is gone?: Yes. A Rule 11UA valuation is still required to support the issue price and is essential for FEMA pricing when foreign investors are involved.
What still has to be filed when I raise at a premium?: A Rule 11UA valuation, board/shareholder resolutions, PAS-3 within 30 days, MGT-14 where required, share certificates with stamp duty, and — for foreign investors — FC-GPR within 30 days plus the annual FLA Return.
Does abolition of angel tax remove FEMA reporting?: No. FEMA filings (FC-GPR, FC-TRS, FLA) are exchange-control obligations entirely separate from income-tax angel tax, and are unaffected by the abolition.

This article is general information, not tax, legal or accounting advice. Statutory timelines and thresholds change by notification — confirm applicability and interpretation with your CA, CS, or lawyer before acting.

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