Apex direct taxes body exempts investments in startups from Section 56(2) of I-T Act The government has removed the so-called `angel tax' for investors providing funding to startups under its ambitious plan to boost entrepreneurship and job creation in the country . Funding to startups, notified under the government-approved plan announced by PM Narendra Modi in January , will not face tax even if it exceeds the face value. Resident angel investors, domestic family offices or domestic funds which were not registered as ven ture capital funds can now heave a sigh of relief and not worry about the invested amount getting taxed.Under existing rules, funds raised by an unlisted company through equity issuance are covered under this tax to the extent the amount is in excess of the fair market value. Such extra inflow is taxable as “income from other sources“ under Section 56(2) of the Income-Tax Act and charged the corporate tax rate, resulting in an effective tax of over 30%. T