 "Budget 2013: Equity flow to start-ups will create jobs")
By Sunil K Goyal, YourNest Angel Fund
We expect the finance minister to encourage the flow of equity to start-ups for generating millions of productive jobs. Measures like permitting pension funds, provident funds, charitable and religious trusts to invest a small part of their corpus in Category 1 AIF and offering special incentives such as tax deduction to investors in start-ups or AIFs (Alternative Investment Funds) will indeed help. The Ministry of Finance can replicate the provisions of Section 54 which has been encouraging the high-net-worth individuals (HNIs) to re-invest capital gains in residential property.
“Category I AIF - those AIFs with positive spillover effects on the economy, for which certain incentives or concessions might be considered by SEBI or Government of India or other regulators in India; and which shall include Venture Capital Funds, SME Funds, Social Venture Funds, Infrastructure Funds and such other Alternative Investment Funds as may be specified. These funds shall be close ended, shall not engage in leverage and shall follow investment restrictions as prescribed for each category. Investment restrictions for VCFs are similar to restrictions in the existing VCF Regulations”-from www.sebi.gov.in
[caption id=“attachment_629679” align=“alignleft” width=“380”] Equity options. AFP [/caption]
The HNIs and corporates can now be encouraged to invest in Category 1 AIF to seek a deduction against capital gains re-invested in AIFs.
Additionally, to really incentivise capital flow into early stage ventures, the Union Budget may provide that any capital gains arising from sale of investment in venture capital undertaking be exempted by introducing a securities transaction tax on the lines of transactions in listed companies.
Besides, this Union Budget can actually take many steps to improve the ranking of India from 173rd position by simplifying processes for making it easier for entrepreneurs to start a business.
The views by Sunil K Goyal first appeared on moneycontrol.com
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