Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: Central Excise rule to resale the machines to a new company :: list of goods taxed at 4% :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: TAX RATES - GOODS TAXABLE @ 4% :: due date for vat payment :: VAT Audit :: ACCOUNTING STANDARD :: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT RATES :: ARTICLES ON INPUT TAX CREDIT IN VAT :: form 3cd :: TDS :: cpt
General »
 Banks warn share tax hike threatens Paris' post-Brexit appeal
 PMC may decide on property tax rebate for IT firms this week
 I-T Dept is giving out certificates of appreciation. Have you received yours?
 Government works on ironing out benefits refund mechanism for exportersa
  Tax officials are using an IDS provision to question transactions beyond six-year-limit
 Tax-free bonds rally like midcap funds
 Senior citizens do not have to pay advance tax on salary and interest income
 GST: Audit commissioners to get adjudication powers
 Interest on NRE rupee account can be exempt from tax under FEMA
 Impact of GST on Real Estate Sector
 GST regime: Tax payers allowed to take option of third-party interfaces

VCs seek tax exemption across sectors
February, 12th 2010

The Indian Venture Capital Association (IVCA) has asked the finance ministry to extend the benefit of tax pass-through on investments across sectors in the upcoming Union Budget. Currently, under the Finance Act, 2007, tax pass-through benefit has been allowed to investments in only nine sectors information technology, biotechnology, nanotechnology, poultry, dairy, bio-fuels, hotels and hospitality centres, seed research and chemical research & development.

In taxation parlance, a pass-through means an exemption from paying taxes by the exempted group. The tax payable by the group is passed on to the end beneficiary, in this case, the investors or limited partners in these VC funds. Funds investing into non-specified sectors (sectors that do not fall inside the exempted bracket) will have to pay tax (on gains) at every exit.

Through its representation, IVCA has asked the government to do away with sectoral specification and restore tax pass-through benefits across sectors for venture capital funds. The industry body has asked the ministry to treat VCFs (venture capital funds) at par with mutual funds, which are automatically exempted from paying taxes at the pool level.

Non-availability of tax pass-through status could lead to higher taxation of income and, therefore, lower returns for the investors, said Pranay Bhatia, partner, Economic Laws Practice.

If tax pass-through benefit is allowed across sectors, as is proposed under the draft Direct Tax Code, it will alleviate tax interpretation challenges which are currently faced by domestic venture capital funds, Mr Bhatia added.

According to IVCA, tax pass-through for select sectors is causing tremendous hardships to VCFs in terms of uncertain interpretations and operational ambiguity. Moreover, most VCFs are set up in the form of trusts. With pass-through unavailable in sectors other than those specified, these trusts (or VCFs) will be governed by the provisions of trust taxation.

Trust laws according to IVCA are archaic and hold good only for private trusts; the provisions of trust laws are difficult to apply in the context of contributory trusts or pooling vehicles (like VCFs), the industry body said.

Pass-through basis of taxation without sectoral restrictions will resolve several of the current issues in the taxation of VCFs. Such a provision will allow the investors in VCFs to be taxed on income directly without any revenue loss to the government, said Hiresh Wadhwani, partner, financial services, Ernst & Young.

Venture capital experts are asking the government to maintain parity with foreign venture capital funds which are exempted from paying tax in India. Currently, there are 137 Sebi-registered domestic VC funds and 135 foreign venture funds.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Web Application Development Web based Software Solution Web Application Deployment Web Application Solutions Web Application Software Development Web Application Deployment Web Application Programming Web Application Design and Development

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions