This is a very difficult or rather a unique Budget for the finance minister with the Election Commission's restrictions on one side and also the entire indirect taxation portion of the budget being missing.

The PE/VC industry is obviously delighted about the Budget. It continues to show that the government cares about PE/VCs as an asset class, which brings not only the capital but capability to build high-quality business.

Last week, we got good news in advance that unlisted shares when sold by Alternative Investment Funds (AIF), the rule pertaining to control and management being transferred and hence being charged higher rate, does not apply to AIFs.

The budget has a lot of positives for the PE/VC industry.

First is the important aspect of indirect transfer law, which could potentially have created double taxation for foreign domicile funds or foreign domiciled vehicles of Indian AIFs. It has been clarified that there will be a circular which specifies that they will not be subject to double taxation.

Second, as VCs and PEs we often use cumulative convertible preference shares (CCPS) as an instrument to discover right pricing in unlisted companies. There was not great clarity whether the date of conversion is the date from which capital gains are calculated or from the original issue date. This has been a long outstanding issue, which has now been clarified. The tax will be calculated from the date of issue and not from the date of conversion.

Third is essentially easing of the laws for startups and the 100% exemption from income tax. We also appreciate the 5% concessional tax on external commercial borrowings and masala bonds to being extended to 2020. It has a positive implication for real estate and infrastructure investors.

The thing we are little bit concerned about is the amendment to Section 10 (38), which basically seems to suggest that after 2004 if somebody bought a share in an unlisted company without obviously paying securities transaction tax and they now sell it in the market they may not be eligible to claim long-term capital gains tax for listed shares. It appears that way. If it is so, it has a lot of potential for unintended damage. This has been classified by the government as an anti-abuse provision; it is not a widening of the tax net. We are studying this carefully.

The thing we loved the most is the finance minister's tone of honouring the honest because ours is a class of assets where both the funds and investee companies take great care and effort to ensure that they are completely compliant while doing business.

Gopal Srinivasan is chairman, Indian Private Equity and Venture Capital Association, and CEO of TVS Capital Fund.

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