In terms of section 10(23 F) of IT Act income by exemptions way of dividend and long term capital gains received by approved VC Companies/Funds from investment made by way of equity shares in a VC undertaking are exempt from tax.
IT rules amended on 18th July 1995 introduced a rule 2(D) which allowed tax exemption under the aforementioned section provided, among others,
(1) An application is made to Director of IT (Exemptions) by the VCC or VCF
(2) VCF/VCC is registered with SEBI.
(3) Not less than 80% of the fund corpus/paid up capital is invested by year 3.
(4) The VCC/VCF does not invest more than 5% of paid up capital/fund corpus in one VC undertaking.
(5) VCC/VCF does not invest more than 40% in equity capital of one VC undertaking.
