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HOME | BUSINESS | BUDGET 2000-2001 | REPORT |
February 29, 2000
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Liberalisation programme for venture capital
Finance Minister Yashwant Sinha today announced a massive liberalisation programme for venture capital firms. Acknowledging the need to encourage software and Internet companies, the finance minister, however, said capital should be available to back ideas in other sectors too. Sinha said the Reserve Bank of India and the Securities and Exchange Board of India are framing guidelines to support this programme. He also declared that venture capital funds will be tax free if declared in the period notified by Sebi and will not require an approval from tax authorities. To simplify the procedure, Sebi will be a single-point nodal agency for registration and regulation of both domestic and overseas venture capital funds. This would give a strong reason to non-resident Indians to invest in India. Sinha said the government was committed to encourage Indian firms and businesses to grow as strong India-based multinationals. Towards this end the minister said it would be necessary to further liberalise the policy for acquisition of companies abroad. He announced that the ceiling under the automatic route for Indian corporates has been increased to $ 50 million from the existing $15 million. To give Indian companies greater access to foreign portfolio investment the finance minister has increased this limit to 40 per cent. Under the existing policy on portfolio investment, foreign institutional investors are permitted to invest in a company up to an aggregate of 24 per cent of the equity, which can be increased to 30 per cent subject to approval by board of directors. Narayan Murthy, chairman, Infosys welcomed the move to liberalise venture capital regime, but said there were some other areas in which the industry was disappointed. He said the industry was hoping that the government would tax stock options at the time of sale of shares and remove the bonding requirement by custom authorities. UNI
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