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Informist, Wednesday, Jun. 18, 2025

MUMBAI – The Securities and Exchange Board of India Wednesday said it will continue to regulate angel funds despite the abolition of the angel tax last year. There is a need to ensure that only those investors with risk capability are shown offers to invest in unlisted start-ups through angel funds, the market regulator said in a press release. Currently, there is no verification as to whether an investor qualifies as an angel investor or not, except for checks done by the fund manager.

In July last year, Finance Minister Nirmala Sitharaman during the Union Budget had proposed to abolish angel tax for all investor classes with an aim to boost India's startup ecosystem and entrepreneurship. "Unlike other AIFs (alternative investment funds) where investment decision is taken by the manager, angel investments are made after explicit investor consent for each investment," SEBI said. Therefore, existing regulations require that only those angel investors who meet certain conditions can invest in angel funds, it added. 

SEBI also approved that angel investors will now need to be accredited investors, in which there is independent verification of investor status. It also gave its nod to amend the Issue of Capital and Disclosure Requirements so that accredited investors will be included as qualified institutional buyers for the limited purpose of investments only into angel funds. 

The market regulator has relaxed floor and cap for investment in a company to INR 1 million-INR 250 million from INR 2.5 million-INR 100 million. It has removed the concentration limit of 25% of total investments of angel funds in an investee company. SEBI has also allowed contributions from more than 200 accredited investors in an investment and enables follow-on investment in an investee company which is no longer a start-up. "The sponsor or manager shall maintain a minimum continuing interest in each investment of the angel Fund, at higher of 0.5% of investment amount or INR 50,000."

The regulator said it is in discussion with the industry on how accredited-investors-only pools can lead to lighter regulation, to ensure improved ease of doing business for all stakeholders. End

Reported by Anjana Therese Antony

Edited by Deepshikha Bhardwaj 

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