Finance Minister, Arun Jaitly is all set to present the third budget with a lot of expectations riding on his back. Indian Angel Network has a set of wishlist from the upcoming union budget 2016-17. Read on…
Budget 2016: While Padmaja Ruparel, President, Indian Angel Network hopes that this budget would end one anomaly – treating unfavourably investments by AIFs and Angel Groups in unlisted companies, Saurabh Srivastava, Co-Founder, Indian Angel Network has full fledged list of expectation from the ‘StartupIndia’ savvy government.
“Currently investors of such companies pay a much higher tax on capital gains while taking a far higher risk as compared to publicly traded shares. We do expect that capital gains tax for AIF funds and angel group investors will be aligned to the current tax regime for investments made in listed shares,” said Ruparel.
Adding to same, Saurabh Srivastava shared the following wishlist of Indian Angel Network.
“The Start up India announcement was a great start. We are hoping that the budget would introduce the necessary measures to take it forward.”
a. The Income Tax Exemption for Start ups
b. Process of defining and identifying start ups
c. Establishment of the Credit Guarantee Fund
d. Waiver of compliances/ Self Certification
e. Creation of the Rs 10,000 Cr provision for Funds of Funds activity
“We also hope that the government would end one anomaly and that is of treating unfavourably investments by AIFs and Angel Groups in unlisted companies.”
a. Today, capital gains tax on investments in publicly listed companies are treated as long term capital gains and taxed at 0% if held for over one year and as short term if held for less than a year and taxed at 15%( plus STT in both cases).
b. But investments in unlisted companies or start ups is taxed at 33% for short term and at 20% for long term capital gains, with the holding period for long term capital gains as 3 Years.
c. These investments in unlisted companies take more risks, are illiquid and create new ventures.
d. They should be treated more favourably or at least on par with trading shares on the stock exchange.
e. This should be allowed at least for investments made by SEBI registered, widely held AIF Category 1 and Angel Funds.
f. The AIFs can collect STT like stock exchanges on such transactions
g. Also, this will end the discrimination against domestic venture capital funds ( AIFs) as forein funds anyway pay no capital gains tax by investing from Maurutius and other treaty friendly countries.
h. This will also nudge foreign funds to register with SEBI
“Implementing these will dramatically increase the flow of risk capital to start ups, something we will need badly as the start up initiative will enthuse innovators around the country to turn entrepreneurs and they will then be disheartened if no risk capital is available to fund their start ups,” he explained.
Srivastava also said that SEBI has come out with an excellent report on how to increase the flow of VC/PE risk capital to India from the current $ 20 billion to $ 50 billion. This is much need capital as last year, Indian companies raised only $ 2 billion from IPOs but $ 20 billion from VC/PE money, 90% of which comes from overseas”