New angel tax notices spook investors, start-ups; trip fund-raising efforts

Differences over 'fair value' of fledgling firms makes assessment difficult

Last week, angel investor Vikram Chachra got a text asking: “Is this legit?” The message, from a founder of a start-up that Chachra and others have invested in, was accompanied by a snapshot of an income tax (I-T) notice asking for copies of tax returns, bank statements, correspondence, ledger details, and more. 

In the past month, Chachra, an active angel investor and partner at early-stage fund 8i Ventures, said five of the dozen companies he had funded had received such notices.

This second wave of I-T notices going out to start-ups on the back of an “angel tax” that came