India's Angel Tax (Section 56)

India's angel tax punishes entrepreneurs for raising capital above government-defined "fair market value," treating the excess as taxable income. This regulation choked startup funding by 20% from 2016 to 2019, with over 30% of early-stage ventures facing audits—a rate 5 times higher than the average for comparable tax rules in emerging economies. Even after partial reform in 2024, it remains more detrimental than #7's restrictions for growth-stage businesses.