Yes, angel investing is legal in India. According to the Securities and Exchange Board of India (SEBI), an angel investor is defined as a "natural person who invests, or who has invested, in the securities of a start-up company on a purely non-commercial basis for their own and/or for the group of relatives as specified below and does not have a relevant relationship with the start-up company, its promoters, directors or management, including being an employee, consultant, advisor, promoter Director or relative of such person.”
Angel investing is regulated by SEBI under the SEBI (Alternative Investment Funds) Regulations, 2012.
There are no specific laws governing angel investing in India. However, various securities laws, such as the Securities Contracts (Regulation) Act, 1956 and the Companies Act, 2013, are applicable to angel investing.
The key regulations relevant to angel investing in India are as follows:
The Securities Contracts (Regulation) Act, 1956: This Act regulates the business of dealing in securities.
The Companies Act, 2013: This Act regulates the incorporation and operation of companies in India.
The Foreign Exchange Management Act, 1999: This Act regulates the foreign exchange transactions in India.
The Income Tax Act, 1961: This Act imposes taxes on income earned in India.
The Angel Tax, which was introduced in the Union Budget 2018-19, is applicable to angel investors in India. Under this tax, angel investors are required to pay tax on the amount invested in a start-up company, over and above the fair market value of the shares.