Budget 2015: More HNIs to hitch start-up ride after tax clarity

More domestic HNI mon ey could show up for India's fast evolving startups and other emerging companies after the finance minister brought in tax clarity for Sebi-registered Alternative Investment Funds (AIFs). The clarity is in the form of a tax pass-through for venture capital and private equity funds, which are fuelling the growth of new enterprises.

Nearly 85 per cent of the early stage and mid-market VC and PE funds deployed in the country are through offshore entities, which already enjoy tax clarity and operational freedom, two factors which prevented most from being domiciled locally .While just-announced tax clarity alone won't prompt foreign investors to change domicile, it is expected to harvest the country's HNI wealth into alternative investments asset classes.

Local ultra-rich have been tentative investors into VC and PE funds, but the latest development could push them more. "This is a significant move, which will help AIFs to take off finally .The tax clarity will help in domestic fund raising," Dhanpal Jhaveri, managing partner, Everstone Capital, and the largest India focused private equity firm, said.

"India-raised funds are a small but high potential VC class. If you look at China, nearly 90 per cent of VC money is now domestic as compared to 10 years back when it was the reverse," said Rehan Yar Khan, founder of Orios Venture Partners.