• Amendment to section 2(15) of the same Act to include microfinance as a charitable activity. This would benefit non-profit MFIs.
• Addition of a new section under 10(23) to make capital gains on equity investments in microfinance NBFCs tax exempt.
• Changes to section 35 to allow these NBFCs to treat expenses on setting up branches in states with low financial inclusion as expense for which they can get 150 per cent rebate. This would help overcome regional disparities
• Amend section 36(1) (viii) to allow these NBFCs to get a tax exemption on 40 per cent of their profits if they keep it in a special reserve as is allowed for housing and infrastructure projects
The committee also says an amendment is needed to the SEBI guidelines that currently prohibit venture capital funds from investing in NBFCs.
The current FIPB guidelines require a minimum $500,000 (Rs 2.25 crore) investment from a foreign entity, which in turn eliminates many “potential investors” from making investments, the group says. Pointing out that several “social investors are individuals with relatively modest means”, it says the threshold should be brought down to $50,000.
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