Angel tax is levied on premium paid on investments in start-ups and unlisted firms to curb "laundering" under the Income Tax Act 1961, as their valuations increase despite stagnant or declining revenues.The Income Tax sleuths have raised concerns over premium paid on shares of startups at valuation that were not commensurate with their revenue growth. A premium higher than the fair market value is considered other income, which is taxable under the angel tax.