Tax on income in case of venture capital undertakings
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 222(1) of Income Tax Act 2025
222(1) Irrespective of anything contained in any other provision of this Act, where a person, out of investments made in a venture capital company or venture capital fund, receives any income, or any income accrues or arises to him, such income shall be chargeable to income-tax in the same manner as if, it were the income accruing or arising to, or received by, such person, had he made investments directly in the venture capital undertaking.
Section 222(2) of Income Tax Act 2025
222(2) The person responsible for crediting or making payment of the income on behalf of a venture capital company or a venture capital fund and the venture capital company or venture capital fund shall furnish, within such time, as prescribed, to the person who is liable to tax in respect of such income and to the prescribed income-tax authority, a statement in the prescribed form and verified in the prescribed manner, giving details of the nature of the income paid or credited during the tax year and such other relevant details, as prescribed.
Section 222(3) of Income Tax Act 2025
222(3) The income paid or credited by the venture capital company and the venture capital fund shall be deemed to be of the same nature and in the same proportion in the hands of the person referred to in sub-section (1) as it had been received by, or had accrued or arisen to, the venture capital company or the venture capital fund, as the case may be, during the tax year.
Section 222(4) of Income Tax Act 2025
222(4) The provisions of Chapter XIX-B shall not apply to the income paid by a venture capital company or venture capital fund under this Chapter.
Section 222(5) of Income Tax Act 2025
222(5) The income accruing or arising to or received by the venture capital company or venture capital fund during a tax year from investments made in venture capital undertaking, if not paid or credited to the person referred to in sub-section (1), shall be deemed to have been credited to the account of the said person––
- (a) on the last day of the tax year; and
- (b) in the same proportion in which such person would have been entitled to receive the income had it been paid in the tax year.
Section 222(6) of Income Tax Act 2025
222(6) Any income which has been included in total income of the person referred to in sub-section (1) in a tax year, on account of it having accrued or arisen in the said tax year, shall not be included in the total income of such person in the tax year in which such income is actually paid to him by the venture capital company or the venture capital fund.
Section 222(7) of Income Tax Act 2025
222(7) Nothing contained in this section shall apply in respect of any income accruing or arising to, or received by, a person from investments made in a venture capital company or venture capital fund, being an investment fund specified in section 224(10)(a).
Section 222(8) of Income Tax Act 2025
222(8) For the purposes of this section, “venture capital company”, “venture capital fund” and “venture capital undertaking” shall have the meanings respectively assigned to them in Schedule V (Note 4).
FAQs on Section 222 of Income Tax Act 2025
What is the tax treatment of income received from investments in a venture capital company or venture capital fund?
Any income received or accrued from such investments is taxable as if the investor had invested directly in the venture capital undertaking.
Is the nature of income preserved when taxed in the hands of the investor?
Yes, the income retains the same nature and proportion in the hands of the investor as it had in the hands of the venture capital company or fund.
Who is responsible for furnishing information related to income from a venture capital company or fund?
The person responsible for crediting or making payment on behalf of the venture capital company or fund, as well as the fund or company itself, must furnish a prescribed statement to both the investor and the income-tax authority.
When is income deemed to be credited to an investor even if not actually paid?
Income is deemed to be credited on the last day of the tax year in the proportion the investor would have been entitled to receive it if it had been paid.
Will income already taxed on accrual basis be taxed again when actually paid?
No, income already included in the total income on the basis of accrual will not be included again when it is actually paid.
Does this section apply to all venture capital fund investments?
No, this section does not apply to income from investments in a venture capital company or fund that qualifies as an investment fund under section 224(10)(a).
What forms and manner are to be followed for furnishing details of such income?
The forms, time limits, and verification methods are prescribed separately and must be complied with for reporting the income details.
Do the provisions of Chapter XIX-B apply to income paid under this section?
No, Chapter XIX-B provisions do not apply to income paid by a venture capital company or venture capital fund under this section.
What is the effective date of applicability for Section 222?
Section 222 applies with effect from 1st April, 2026.
What are the definitions of “venture capital company”, “venture capital fund”, and “venture capital undertaking”?
These terms carry the meanings assigned to them in Schedule V (Note 4) of the Income Tax Act, 2025.
