India's Central Board of Direct Taxes has published Notification No. 29/2023 and Notification No. 30/2023 of 24 May 2023, which provide for the implementation of the "angel tax" exemptions for certain non-resident persons and start-ups in relation to Section 56(2)(viib) of the Income-tax Act, 1961 (previous coverage). Section 56(2)(viib) generally provides that consideration received for the issue of shares that exceeds the fair market value of the shares is chargeable to income tax under the head "Income from other sources", which is known as the "angel tax".
Notification No. 29/2023 provides that Section 56(2)(viib) does not apply to the following (i.e., are exempt from "angel tax"):
The 21 countries and specified territories listed in Notification Annexure include Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Iceland, Israel, Italy, Japan, Korea (South), New Zealand, Norway, Russia, Spain, Sweden, the United Kingdom, and the United States.
Notification 30/2023 provides that section 56(2)(viib) does not apply to consideration received by a company from any person for the issuance of shares, which exceeds the face value of such shares, if the company fulfills the conditions specified by the Department for Promotion of Industry and Internal Trade (DPIIT) and files the required declaration. This provides the exemption for investments in start-ups.