Page 21 - Union Budget_2019

Union Budget 2019

However, the above-mentioned provision is not applicable in the case of consideration for issue of shares

received by: -

• Venture capital undertaking

• Venture capital company
• Venture capital fund or
• A company or classes of persons may be notified as may be notified by the Central Government.

Currently this benefit is available only to a Category I AIF i.e. funds received by venture capital undertakings

from Category I AIF shall not be liable for above mentioned taxation; however, with a view to facilitate
venture capital undertakings to receive funds from Category II AIF, it is proposed to amend the said section

to extend this exemption to fund received by venture capital undertakings from Category II AIF, registered
under regulations of SEBI.

This amendment will take effect, from 1st April, 2020 and will, accordingly, apply in relation to the

assessment year 2020-21and subsequent assessment years.

Alternative Investment Fund (“AIF”)

Any fund established or incorporated in India which is a privately pooled investment vehicle which collects
funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined

investment policy for the benefit of its investors

Category I AIF - AIFs which invest in start-up or early stage ventures or social ventures or SMEs or
infrastructure or other sectors or areas which the Government or regulators consider as socially or

economically desirable and shall include venture capital funds, SME Funds, social venture funds,
infrastructure funds and such other Alternative Investment Funds as may be specified by SEBI

Category II AIF - AIFs which do not fall in Category I and III and which do not undertake leverage or
borrowing other than to meet day-to-day operational requirements and as permitted in the SEBI
(Alternative Investment Funds) Regulations

Various types of funds such as real estate funds, private equity funds (PE funds), funds for distressed assets,
etc. are registered as Category II AIFs
Various types of funds such as hedge funds, PIPE Funds, etc. are registered as Category III AIFs

Category III AIF - AIFs which employ diverse or complex trading strategies and may employ leverage
including through investment in listed or unlisted derivatives

19