As per Revised Rule vide Notification dated 11th April '2018 issued by Ministry of Commerce and Industry ( Department of Industrial Planning and Promotion) and subsequently amended on 19th February 2019-
A Startup being a Private Limited Company or LLP recognised as Startup shall be eligible to apply for approval for the purpose of Section 56(2)(viib) of the Income Tax Act ( popularly known as ANGEL TAX), if the following conditions are fulfilled:-
(i) the agreegate amount of paidup share capital and share premium of the startup after the proposed issue of share capital does not exceed Rs 25 crores.
(ii) the investor/proposed investor, who proposed to subscribe to the issue of share of the startup has
a) the average returned income of the Rs 25 Lakhs or more for the proceeding three financial years, or
b) the networth of Rs 2 Crores or more as on the last date of the proceeding financial year, and
(iii) the startup has obtained a report from a merchant banker specifying the fair market value of share in accordance with rule 11UA of the Income Tax Rule, 1962.
(iv) Benefit available for 10 years.
APPLICATION & APPROVAL PROCESS:-
The application for approval under this para shall be made in Form-2 to the Board and shall be accompanied by documents specified therein.
And Board may after calling for such documents or information and making such enquires, as it may deem fit -
i) Grand approval for the purpose of Section 56(2)(viib) of the Act, specifying the relevent details, including details of investors, amounts of premium on which shares are to be issued and the latest date by which the shares are to be issued;
ii) Decline to grant the said approval after providing reasons.