MUMBAI: New companies and venture capital (VC) companies are looking for an easier tax regime and measures to increase the availability of internal capital in the next Budget.
Parity between foreign and domestic funds in terms of taxes is required to attract foreign investors to India. alternative investment funds (AIF), said Siddarth Pai, founding partner at 3one4 Capital and co-chairman of the regulatory affairs committee of the Indian Venture and Alternate Capital Association (IVCA).
“If foreign investors see that foreign funds enjoy better tax treatment in India, they will prefer these foreign vehicles over Indian AIFs. This parity will also attract investors and fund managers to IFSC GIFT“Pai said.
Insurance companies, banks and pension funds should be encouraged to invest alongside the government through fund of funds schemes to boost the growth of AIFs, said Padmaja Ruparel, co-founder of Indian Angel Network (IAN). . This will allow the expansion of national capital for new companies, Ruparel said. AIFs are pooled investment vehicles for investing in assets such as startups. Current rules do not allow insurance companies and pension funds to invest directly in startups; They can only do so through a fund of funds that are allowed to invest in FIA.
India requires a fund of funds backed by the sovereign and anchored in SIDBI which allows contributions from global banks, insurance companies and sovereign wealth funds, said Anirudh A Damani, managing partner of ArthaVenture Fund. “With SIDBI as an anchor, this approach will create a much-needed pool of patient capital that caters to startups at all stages,” Damani said, adding that the government should also broaden the definition of startups to allow more companies to get backing. . The current DPIIT startup classification limits eligibility to companies up to 10 years old or with a turnover of less than Rs 100 crore.
Startups look to relax on Esop (employee stock ownership plan) tax regime. Treating Esops as stocks with simplified tax structures would make them a viable wealth creation tool, helping startups retain and attract top talent, said Mayank Kumar, co-founder of upGrad. The fintech sector continues to fight for the implementation of a tiered commercial discount rate regime for UPI transactions.