A SEBI panel has recommended sweeping changes in rules governing venture capital and private equity funds in India to bring the norms in line with global practices and help attract capital flows, streamline tax collections and widen the participation of domestic and overseas investors.

The Securities & Exchange Board of India’s committee on Alternative Investment Funds (AIFs), headed by Infosys founder NR Narayana Murthy , has proposed creating a favourable tax environment for investors, tweaking of safe harbour rules, unlocking domestic pools of capital, enabling onshore fund management in India and reforming the AIF regulatory regime.

AIFs, which include venture capital, private equity, debt funds and infrastructure funds, can attract large capital flows that can potentially reach as much as 2% of GDP (gross domestic product) if regulatory issues are streamlined, according to the committee.

As part of the tax proposals, the committee recommended introducing the securities transaction tax (STT) for private equity and venture capital investments.

The 21-member panel was set up to ensure rules are in step with India’s rapidly evolving startup ecosystem.

Members of the panel include Sanjay Nayar, Chief Executive Officer for Kohlberg Kravis Roberts & Co in India, Manish Chokhani, chairman of TPG Growth India, Gautam Mehra, a partner with PricewaterhouseCoopers India. Also on the panel are KEC Raja Kumar, CEO of Ascent Capital Advisors, Ajay Piramal, chairman of Piramal Group, Manish Kejriwal, managing partner of Kedaara Capital, and Arvind Mathur, president of Indian Private Equity & Venture Capital Association.

Source: The Economic Times