New Delhi, March 02, 2016: The Indian Private Equity & Venture Capital Association (IVCA) regards the Budget as a positive move which addresses some of the reforms requested by the Association and its members.
The tax framework for start-ups in the budget will certainly be a strong incentive for new entrepreneurs. In addition the measures for promoting ease of business are also good news. Since venture capital funds invest in start-ups this is good news for the venture capital industry.
Foreign investors provide the lion’s share of private equity and venture capital in India.Most invest directly rather than through India -domiciled funds. The Government has partially addressed the hurdles facing foreign investors in domestic Alternative Investment Funds by effectively removing the tax deducted at source requirement. This is a step in the right direction.
Another confidence building measure introduced in the budget is the relaxation of the requirement to qualify for the lower long-term capital gains tax rate. The holding period for determining the long-term character of investments in unlisted shares has been lowered to 2 years from the previous three.The Association’s recommendation was that this should be one year to ensure parity with the holding period criteria for listed shares.
The Association also welcomes the recent announcement to promote pension fund investments in Alternative Investment Funds.
The Association will continue its policy dialogue with the Government and make representations to the Government on the unfinished agenda of reforms.
Two critical items remain to be addressed and the Association expects these will be introduced in the next budget.
One is the need for complete clarity in pass-through taxation by eliminating the notion of business income as a part of the income of Alternative Investment Funds.The other is the need for a more friendly safe-harbour regime to attract fund managers based abroad to be based in India.
Sanjay Nayar, Chairman, IVCA, said that “the Union Budget 2016 is another example of this Government taking progressive economic measures for which there is strong national consensus. The Budget is aimed at creating more jobs and improve the start-up environment for young Indians. More stable, long-term capital inflows can be expected in the coming financial year and beyond.”
Gopal Srinivasan, Vice Chairman, IVCA said that “This is a forward-looking Government. The policymakers have heard the views of various sections of society in formulating the Budget. Looking at all the reforms in the Budget, I have no doubt that the Indian economy will maintain its stellar position in world markets.
“The theme of Start Up India, Stand Up India has been a recurring leitmotif in the past year. Policymakers on this front have been highly engaged with the entire spectrum of leadership at the ministry of finance and Central Board of Direct Taxes, partly through Sebi’s Alternative Investment Policy Advisory Committee report, as well as The Indian Private Equity and Venture Capital Association. Hence, expectations were very high.”
Arvind Mathur, President, IVCA said that ” this budget shows that the Government clearly recognises the importance of private equity and venture capital to the Indian economy. The main attractions of such capital are its long-term character and the myriads of ways in which fund managers support and add value to their portfolio companies.”
Corporate Comm India(CCI Newswire)
