A Sebi panel has recommended a favourable tax regime for venture capital (VC) and private equity (PE) funds to boost the startup ecosystem in the country.
A Sebi panel has recommended a favourable tax regime for venture capital (VC) and private equity (PE) funds to boost the startup ecosystem in the country.
The committee, chaired by Infosys founder N.R. Narayana Murthy, asked the government to promote onshore fund management and reform the Alternative Investment Fund (AIF) regime. VCs and PEs registered with Sebi with local fund managers are called as AIFs.
A key proposal is for introduction of Securities Transaction Tax (STT) for PEs and VCs “on all distributions of AIFs, investment, short-term gains and other income and eliminate any withholding of tax.”
After STT, the panel said the income from AIFs should be tax free to inves-tors. The exempted income of AIFs should not suffer tax withholding of 10 per cent. The investment gains of AIFs should be deemed to be ‘capital gains’ in nature.
The panel sought clarity in the rules for investment by NRIs in AIFs on a non-repatriation basis — a move which it feels would allow NRIs to invest in AIFs using funds in their rupee accounts. It also suggested exempting services for raising funds from overseas investors from the service tax.
