IVCA wants relook at tax provisions

BANGALORE: The Indian Venture Capital Association (IVCA) will write to the

ministry of finance (MoF) asking it to take a look at the newly introduced 20

per cent tax provision on distributed and undistributed income of venture funds.

In a meeting held in the office of the Securities and Exchange Board of India

(Sebi) to discuss the budgetary proposals, the association members also informed

Sebi about their discussions. "The budget is a mixed blessing for venture

funds. We are happy that venture funds are finally getting the attention that is

due to them and that Sebi has been made the nodal agency. But a 20 per cent tax,

venture funds cannot be called to really pass through structures," said

IVCA chairman Vishnu Varshney.

The association members feel that investors like financial institution Sidbi

and Unit Trust of India (UTI) who do not come under the tax purview, will now be

taxed, if they invest in venture funds. Thus, the tax is a disincentive to such

investors, points out Mr Varshney. The association also wants the benefit of

setting off losses incurred by investors in venture funds against the profits

made by them. This is an incentive in the US for corporates and wealthy

individuals to invest in venture funds. The other issues that the association

plans to take up with the finance minister are that of definition of venture

funds. It is felt that multiple definitions will add to complications for

venture funds.