SEBI to decide tax benefits for VCFs shortly

By Our Special Correspondent

NEW DELHI, DEC. 11. With the Government changing the norms for venture capital funds to exit from the ventures promoted by them, the Securities and Exchange Board of India has decided to finalise proposals for tax benefits for such exiting funds. The new proposals are likely to be approved at the December 27 board meeting of SEBI.

As per earlier norms, venture capital funds were required to exit promoted ventures within one year of the listing of the scrips of the promoted ventures. Consequently, these funds were eligible for tax benefits if they exited within this stipulated period. However, because the venture capital industry pointed out various drawbacks in this rigid stipulation, the Government relaxed the norms and the new SEBI proposals are intended to take care of these changes.

While giving out this information at a FICCI (Federation of Indian Chambers of Commerce and Industry) meeting here today, the SEBI Chairman, Mr. D. R. Mehta, also said that on exit point for venture capital funds from unlisted companies, there were some difficulties regarding valuation.

Earlier, the Reserve Bank of India certification was needed for valuation purposes but now a decision had been taken by the RBI not to insist on certification at the time of exiting.

In case of foreign institutional investors (FIIs), a benchmark was available in terms of the value of the shares of the companies as these shares were traded in the market, Mr. Mehta pointed out.

The SEBI Chairman also emphasised that all existing venture capital funds were required by law to get themselves registered with SEBI. Unless they got the registration, they would not be eligible for tax benefits, he added. Mr Mehta said by the end of 1998, there were only eight venture capital funds registered with SEBI and this number had gone up to 31 by January 2000.

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Section  : Business
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