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Section 56(2)(viib) - Angel Tax Exemption Registration

Protect Your Start-up Funding from Angel Tax

What is Section 56(2)(viib) Exemption?

Section 56(2)(viib) of the Income Tax Act taxes start-ups if they issue shares at a price higher than the “fair market value (FMV).” This is commonly called “Angel Tax”, which often discourages investors.

To promote start-up funding, the government allows DPIIT-recognized start-ups to apply for full exemption from Angel Tax under Section 56(2)(viib).

This ensures that investments from resident investors, HNIs, and venture capitalists are not taxed as income.

Eligibility for Angel Tax Exemption

Must be a DPIIT-recognized start-up
Incorporated as a Private Limited Company (LLP/Partnership not eligible)
Share capital + premium after issue should not exceed ?25 Crores (excl. certain investors like VCs, listed companies, Category I AIFs)
Investors should be resident individuals or entities not engaged in blacklisted sectors
The entity should not be investing in immovable property, loans, capital market instruments, etc. (restricted assets)

Key Benefits of Section 56 Exemption

No Angel Tax Liability - Investments above FMV are exempted
Attract More Investors - Removes tax uncertainty for angel investors
Boost Valuation Flexibility - Issue shares at higher premium justified by growth
Investor Confidence - Encourages resident investors & HNIs to fund start-ups
Hassle-Free Compliance - Smooth fundraising without tax scrutiny

Documents Required

DPIIT Recognition Certificate
Certificate of Incorporation (CIN)
PAN of Company
Cap table (Shareholding structure)
Board resolution for exemption application
Valuation report (if applicable)
Investor details & investment agreement draft

Our Package Includes:

Eligibility check & advisory on 56 exemption
Drafting & filing of exemption application with DPIIT & CBDT
Assistance in preparing valuation reports to justify share premium
Handling clarifications / queries from authorities
End-to-end support till final Angel Tax Exemption Approval

Why Choose FinnovateAI?

Trusted advisors for start-up funding & taxation
Strong expertise in DPIIT, CBDT & IMB processes
Valuation support from certified professionals
Fast turnaround & transparent pricing
Dedicated CA team to assist until approval

Process in 4 Simple Steps

Add Service & Checkout at FinnovateAI.com
Upload Documents (DPIIT, incorporation, investor details)
Application Filing with DPIIT/IMB for exemption
Approval Certificate – Raise funds without Angel Tax worries