Notification

  • Not Able to Find What You’re Looking For? Speak to us directly! Our experts are here to guide you through any queries or challenges.

    Speak to Us

Budget 2023 – Applicability of Angel Tax for foreign investors from April 1, 2023

Get in touch with us

    Your information is confidential and secure

    If you are a foreign investor investing in Indian companies or a startup raising money from foreign investors post April 1, 2023, angel tax is now applicable. We have summarized the implications for you below

    Upto March 31, 2023:

    Non-resident investors (typically offshore PE/VC funds) generally made primary investment in Indian startups at a price which was above the FMV as per the valuation report without there being any income tax implications. The reason was that it allowed investor to have room to exercise their anti dilution liquidation preference rights by revising the conversion ratio incase of a down round*.

    Budget 2023 – Applicability of Angel Tax for foreign investors from April 1, 2023

    From April 1, 2023 onwards:

    While the FEMA pricing rules as discussed above continue as it is, section 56(2)(viib) of the Income-tax Act, 1961 now provides that the Indian company will be liable to pay tax if it issues shares to a non-resident at a price above its FMV (as determined by a merchant banker). Thus, Indian company will have to issue shares to non-resident investors exactly at FMV.

    Further, implementation of such investor protection clauses may not be as straightforward and the non-resident investors will need to look at alternate options such as rights issue or bonus issue or buyback, etc

    *As per FEMA rules, price at the time of conversion should not be lower than the FMV at the time of issuance

    About the Author
    Jitesh Agarwal
    Jitesh Agarwal
    Founder | jitesh@treelife.in

    Leads the VCFO, finance tax, and regulatory functions at Treelife. Responsible for the firm’s non-operational growth and providing strategic advisory in GIFT City, helping clients navigate complex regulatory landscapes effectively.

    Priya Kapasi Shah
    Priya Kapasi Shah
    Associate Partner | Tax & Regulatory | priya.k@treelife.in

    Heads Treelife’s Financial Advisory practice, specializing in investment structuring, cross-border transactions, and tax and regulatory advisory. Also leads on AIF setups and advisory services for GIFT IFSC.

    Rohit Gandhi
    Rohit Gandhi
    Senior Associate | Tax & Regulatory | rohit.g@treelife.in

    Specializes in financial due diligence, valuations, business structuring, and income tax advisory. Contributes to the Financial Advisory team by helping startups and businesses make informed strategic decisions.

    We Are Problem Solvers. And Take Accountability.

    Related Posts

    ESOP Taxation in India – A Complete Guide (2025)
    ESOP Taxation in India – A Complete Guide (2025)

    Employee Stock Option Plans (ESOPs) have become an essential tool for businesses, especially startups and growth-stage companies, to attract, retain,...

    Learn MoreLearn More
    ESOPs in India: Process, Tax Implications, Exercise Price, Benefits
    ESOPs in India: Process, Tax Implications, Exercise Price, Benefits

    In the contemporary competitive job market, companies are constantly seeking innovative ways to attract and retain top talent. Employee Stock...

    Learn MoreLearn More
    Tax Exemption for Startups in India (2025)
    Tax Exemption for Startups in India (2025)

    In India, tax exemptions for startups are crucial for encouraging innovation and promoting the growth of new businesses. These exemptions...

    Learn MoreLearn More

    For Customer Support

    Mumbai | Delhi |
    Bangalore | GIFT City

    Speak to Us!

    We respond within 60 minutes.

      Your information is confidential and secure

      For Customer Support

      Mumbai | Delhi |
      Bangalore | GIFT City

      Fill out the form to unlock the full report!

      Image