Indian PE-VC Firms Demand Tax Rates for AIFs Same as Public Market Investors
Indian private equity and venture capital industry represented by IVCA have demanded Alternative Investment Funds (AIFs) to be equal to the public market investors regardless of whether their exits are through listed markets or through private sale.
Presently, the Indian income tax code has a complex and differentiated approach on tax treatment of listed and unlisted shares at the hands of AIFs. There is no parity on the tax treatment between transactions done through private markets and those done through public markets on aspects such as what would constitute long-term or short-term and the rate that would be applied.
When their exits are private, AIFs can end up paying higher taxes than public market investors would for the same gains and period of holding. The issue was also taken to the Finance Minister Nirmala Sitharaman during her recent consultations with representatives of Indian private equity industry last week, as part of the broad-based engagement with key financial sector players.
Private equity industry honchos had also pointed out they were active managers of funds and there has been steady annual flow of more than $25 billion into the Indian economy, most of which was primary capital for investment-led growth.
“There is no logic for having a differentiation. This government wants to simplify and improve ease of investing into India. PE & VC players provide risk capital and overlay the capital with active value addition in their portfolio companies. Also, in most markets of the world, taxes are not differentiated on the basis of public versus private sale. The tax treatment should be simple and consistent,” said Padmanabh Sinha, Chairman, Indian Private Equity and Venture Capital Association (IVCA).