# Angel Round Advisory

> An angel round in India is usually done as a private placement of equity or compulsorily convertible preference shares: a special resolution, a PAS-4 offer letter to named investors, money received only through a separate bank account, allotment within 60 days and PAS-3 within 15 days of allotment. Angel tax no longer applies from AY 2025-26, but foreign angels still trigger FEMA pricing and FC-GPR.

Practice: Startup Funding, ESOP & Valuation — https://www.industax.com/services/startup-funding/

Founders often take angel money informally and fix the paperwork later — which surfaces as a problem in the next round's due diligence. We set up the round properly: the instrument, the valuation support, approvals, offer letters, the separate bank account and allotment filings.

For angels outside India, the issue price must meet FEMA fair-value rules and the company files FC-GPR within 30 days of allotment. For DPIIT-recognised startups, convertible notes of ₹25 lakh or more per tranche are another quick option.

## Key facts

| Item | Detail |
| --- | --- |
| Route | Private placement (Section 42) with preferential allotment rules |
| Offer limit | Up to 200 persons per financial year (excluding QIBs and ESOPs) |
| Allotment | Within 60 days of receiving money; PAS-3 within 15 days |
| Angel tax | Not applicable from AY 2025-26 |
| Foreign angels | FEMA pricing and FC-GPR within 30 days |

## Who needs this

- Founders raising from angels or angel networks
- Startups taking friends-and-family money
- Startups with foreign angel investors

## What's included

- Instrument and term guidance
- Valuation coordination
- Resolutions, PAS-4 and PAS-3
- FEMA filings for foreign angels

## Documents

- Term sheet or investor commitments
- Investor KYC
- Latest financials and cap table

## Process

1. **Structure** — Instrument, price and investor list fixed.
2. **Approve and offer** — Resolutions passed; offer letters issued.
3. **Allot and file** — Shares allotted; ROC and RBI filings made.

## FAQs

### Do angel investments still attract angel tax?

No, Section 56(2)(viib) doesn't apply from AY 2025-26. Rounds raised earlier can still be examined in pending assessments.

### Can we accept angel money before the paperwork is done?

Only into a separate bank account after the offer letter is issued, and shares must be allotted within 60 days or the money refunded.

### Should angels get equity or CCPS?

Equity is simpler; CCPS lets investors take preference rights and defer the conversion ratio to a later priced round. We weigh both for your round.

## Official sources

- Ministry of Corporate Affairs — MCA21: https://www.mca.gov.in/
- RBI — Master Direction on Foreign Investment: https://www.rbi.org.in/Scripts/BS_ViewMasterDirections.aspx

---
Canonical page: https://www.industax.com/services/startup-funding/angel-investment-advisory
Publisher: Indus Tax — CA-led tax and compliance firm (https://www.industax.com). Contact: info@industax.com, 9059139258.
This is general information, not advice for your specific facts.