IVCA for removing tax on VCFs income

April 21: In a memorandum to the Finance Ministry, the association said "the proposal to levy 20 per cent tax on income of venture funds on behalf of investors removes tax transparency of the vehicle."

"In case it is not made pass-through, investors to the venture funds like UTI, Small Industries Development Bank of India (Sidbi) and other mutual funds, who do not pay tax otherwise, will be required to pay indirectly a 20 per cent tax," it said.

Venture funds would be unattractive to other corporate and high-net worth individual investors when compared to investments in equities where they have to pay 10 per cent capital gain tax, it added.

The tax on incomes of venture funds also leads to multiple taxation, the association said.