FinMin Clarifies: No Revised Angel Tax Rules Issued in September 2025 — Startups’ Concerns “Do Not Arise”

It has been a confusing year for India’s startup ecosystem. Amid changing regulations, shifting tax frameworks, and a constant chase for clarity, few topics have sparked as much anxiety as the angel tax. For months, founders, investors, and industry groups whispered about “revised rules” supposedly brought in after September 2025—rules they feared could complicate fundraising all over again.

But on Tuesday, the Ministry of Finance broke the suspense with a clarification that may change the direction of the conversation entirely.

In a written reply to the Rajya Sabha on December 2, Minister of State for Finance Pankaj Chaudhary stated that no revised angel tax rules were issued in September 2025—and therefore, any concern or representation from startups about such rules “does not arise.”

This statement does more than just provide clarity. It resets months of speculation.

A Year of Confusion Meets a Straight Answer

For India’s startup founders, the last several years have been marked by a rollercoaster of regulatory changes—especially around Section 56(2)(viib) of the Income Tax Act, widely known as the angel tax provision. Introduced to curb money laundering, the section often ended up ensnaring early-stage startups in lengthy valuation disputes and unexpected tax notices.

So when rumours resurfaced about “revised” rules coming into effect in September 2025, fear spread again.

But Chaudhary’s response to Parliament cuts through the speculation.

“No revised angel tax rules were notified in September 2025.”

With this one line, the minister effectively stated that the foundation of the controversy—alleged new rules—never existed.

This also meant the Ministry could not have received any representations from startup associations regarding challenges caused by such revisions. After all, there were no revisions in the first place.

Angel Tax Already Sunset Earlier This Year

The minister also reminded the House of a crucial point many in the ecosystem had overlooked:

Angel tax for unlisted startups was already made inapplicable from April 1, 2025, via the Finance Act (No. 2), 2024.
This corresponds to Assessment Year 2025–26, effectively marking the end of the contentious provision.

And with the sunset of Section 56(2)(viib), the chain reaction is clear:

• No angel tax applicability

• No more “double taxation” worries

• No valuation-related disputes

• No additional compliance burden around the provision

• No need to seek further exemptions

Chaudhary explicitly stated that valuation rules tied to this section ceased to apply from April 2025.

For many founders who spent years trying to explain their valuations to tax authorities, this is a significant shift.

Is the Government Considering Further Relaxations?

Industry voices have often pushed for blanket exemptions—especially for DPIIT-recognised startups. When asked whether such an exemption was on the table, Chaudhary offered a short, direct response: the question “is not applicable”.

Why? Because with the angel tax provision no longer in force, the need for exemptions no longer exists.

In other words, the sunset itself is the exemption.

For an ecosystem constantly on edge about compliance, this parliamentary clarification does several things:

• Puts rumours to rest about revised rules in September 2025

• Confirms the official end of the angel tax provision from April 2025

• Signals reduced friction for early-stage fundraisers going forward

• Reinforces that no new valuation or taxation burdens were added in 2025

At a time when India is chasing innovation-driven growth and pushing for more domestic capital formation, the clarification removes lingering doubt for founders and angels alike.