The Angel Hangover, ED’s Complaint Against WinZO, and Nationwide ‘Online’ Strike

For a tax that was officially abolished in 2024, the Angel Tax is proving remarkably hard to kill.

In January 2026, a fresh wave of “legacy notices” landed on startup balance sheets - demands tied to funding rounds from 2017 to 2021, when the tax was still law. Cases like TravelKhana’s ₹2.3 crore penalty and OYO’s ₹1,140 crore dispute have revived a fight founders thought they had already won: whether India truly wants startups, or merely their paperwork.

Legally, the government is on firm ground. Transactions are assessed under the law that existed when they happened. But economically, this logic is freezing the ecosystem. Legacy Angel Tax disputes have become due-diligence poison. Foreign VCs are pausing mid-stage investments when unresolved tax exposure appears, worried that new capital will be swallowed by account attachments. Money meant for growth is stuck behind litigation.

This is not abstract damage. Seed funding shrank in 2025. Angel participation collapsed. Investor counts halved. A startup with a tax dispute is now treated like radioactive waste in Series B rooms - technically investable, commercially toxic.

The cruelty lies in how the tax operates. If a company raised money at a ₹100 crore valuation in 2019 and later raised at ₹60 crore, tax officers can argue that the earlier investors “overpaid” and treat the gap as income. Normal venture volatility becomes retroactively criminal. Innovation is punished for market correction.

Defenders say this is about tax justice. Angel Tax was meant to block laundering through inflated share premiums. Blanket amnesty risks rewarding bad actors. And the Revenue Department faces pressure to hit collection targets. Forgiving disputes could cost ₹500-1,000 crore.

But unresolved disputes cost far more.

The Vodafone case should have settled this debate. A legally defensible stance became a reputational disaster. It took thirteen years and international arbitration to undo the damage. Angel Tax risks replaying the same film - this time with startups instead of telecom giants.

Globally, India is out of step. The UK does not tax early-stage risk; it subsidises it through SEIS and EIS. The state absorbs part of the downside to encourage entrepreneurship. India removed its penalty but replaced it with nothing. Neutral policy in a competitive world is still disadvantage.

Pressure is now visible. Founders are posting account-freeze notices publicly. VC groups are lobbying for a clean-slate policy. Deep-tech investors want safe harbours. Startup bodies warn that legacy disputes are branding Indian companies as “uninvestable.”

Inside government, the contradiction is obvious. Startup India 2.0 sells ambition and scale. The Revenue Department enforces historical compliance. One arm markets confidence. The other manufactures fear.

This is why Budget 2026 matters.

A time-bound Startup Dispute Settlement Scheme - discounted resolution with immunity from future reassessment - would unlock frozen capital, restore investor trust, and preserve fiscal dignity. It would not erase law. It would close a chapter.

The choice is not between justice and growth. It is between closure and decay.

India cannot build a $7 trillion economy while litigating its past. Either it buries the Angel Tax legacy now, or it will keep paying for it - in lost capital, lost founders, and lost credibility.

Let’s go through what else is happening in Indian startup world - Grab your simmering cup of StartupChai.in and unwind with our hand-brewed memes.

“Gali Gali Chor Hai”: ED Alleges WinZO Duped Users of INR 734 Cr Through Manipulated Games

The Enforcement Directorate has filed a prosecution complaint against gaming startup WinZO, its directors, and linked Indian and foreign entities, alleging large-scale game manipulation and laundering of illicit proceeds.

According to the ED, users were drawn in with small bonuses and early wins, only to be gradually matched against increasingly difficult bots that triggered sustained losses.

Read more here

“Revolution Will Not Be Live-Streamed”: Gig Workers’ Union Calls For Nationwide ‘Online’ Strike

The Gig and Platform Service Workers’ Union had called for a nationwide “online” strike on 26th January, urging gig and platform workers to switch off their apps in protest. The union said this digital shutdown will be followed by coordinated physical protests across the country on February 3.

Through the action, Gig and Platform Service Workers’ Union is pressing for formal worker recognition and a comprehensive Central law to regulate gig and platform work.

Read more here

“Hum Saath Saath Hai”: Pine Labs partners UAE’s Wio Bank to build payment acquiring system

Fintech unicorn Pine Labs has partnered with UAE-based digital lender Wio Bank to build a new payment acquiring system for the bank. Under the partnership, Wio Bank will deploy Pine Labs’ acquiring platform Credit+ to power its merchant payment operations.

The collaboration is expected to enable faster merchant onboarding, real-time settlements, and support for multiple payment modes across both online and offline channels.

Read more here