MEASURES
TO ACCELERATE ECONOMIC DEVELOPMENT
Incentives
to Venture Capital
It is proposed
to insert a new clause (23FA) in Section 10 to provide that any income
by way of dividends or long term capital gains of a venture capital fund
or a venture capital company from investments made by way of equity shares
in a venture capital undertaking will not be included in computing the
total income.
The venture
capital fund or the venture capital company would require the approval
of the Central Government in accordance with the rules made in this behalf
and would also be required to satisfy the prescribed conditions before
being able to avail this exemption. Such approval of the Central Government
will have effect for the number of assessment years prescribed in the
order of approval. However, at one time the approval can be for a maximum
number of three assessment years.
The expressions
"venture capital fund" has been defined to mean a fund operating
under a registered trust deed established to raise moneys by the trustees
for the investments mainly by way of acquiring equity shares of a venture
capital undertaking in accordance with the prescribed guidelines.
The expression
"venture capital undertaking" is being defined to mean a domestic
company whose shares are not listed in a recognised Stock Exchange in
India. The businesses in which the undertakings may be engaged are software;
Information Technology; production of basic drugs in the pharmaceutical
sector; bio-technology; agriculture and allied sectors; such other sectors
as may be notified by the Central Government in this behalf or production
and manufacture of any article or substance for which patent has been
granted to the National Research Laboratory or any other scientific research
institution approved by the Department of Science and Technology.
As a consequence
to the above amendment, it is proposed in insert a sunset clause in the
existing section 10 (23F) so that the provisions of this clause which
provide exemption in respect of any income by way of dividends or log
term capital gains of a venture capital fund or a venture capital company
from investments made by way of equity shares in a venture capital undertaking,
shall not apply to any investment made after 31st March, 1999. Such investment
will qualify for exemption under the newly inserted clause (23FA) in section
10.
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