Over 38 percent of the startups in the country - 39,000 at last count - have received 'angle tax' notices in 2018, Financial Express reported.

The ‘angel tax’ notices resulted in a 21 percent fall in capital infusion in startups, the report said citing data from iSPIRT, a think-tank for the Indian software products industry.

The problem plaguing the startup sector was brought to notice in a letter to Prime Minister Narendra Modi by iSPIRT, the report said.

The notices were issued under the Section 56 of the Income Tax Act, which considers the angel funding received as 'over and above the enterprise value' as 'income from other sources' and hence taxable under the marginal rate tax of 30 percent, the report added.

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