Section 222: tax on income in case of venture capital undertakings

How the pass-through works

Income received by, or accruing or arising to, a person out of investments made in a venture capital company or venture capital fund is chargeable to tax in the same manner as if that person had invested directly in the venture capital undertaking.

Income paid or credited by the venture capital company or fund is deemed to be of the same nature and in the same proportion in the investor's hands as it was when received by, or accrued to, the company or fund during the tax year.

Income not actually paid or credited during the tax year is deemed credited to the investor's account on the last day of that tax year, in the proportion the investor would have been entitled to receive it.

Income already taxed in the investor's hands on an accrual basis in one tax year is not taxed again in the year it is actually paid.

Reporting obligation and other rules

The person responsible for crediting or paying the income on behalf of the venture capital company or fund, and the company or fund itself, must furnish a prescribed statement, within the prescribed time, to the taxable person and to the prescribed income-tax authority, giving details of the income paid or credited during the tax year.

The provisions of Chapter XIX-B (TDS/TCS provisions referred to in the section) do not apply to income paid by a venture capital company or fund under this Chapter.

This section does not apply to income from investments in a venture capital company or venture capital fund that is itself an "investment fund" specified under Section 224(10)(a) - such income is instead governed by Section 224.

Frequently asked questions