Venture Capital Taxation Laws Quiz

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Questions and Answers

What is a key feature of Venture Capital investments?

  • Low Risk
  • Short term horizon
  • High Liquidity
  • Equity participation and capital gains (correct)

Which stage of financing involves providing capital for product development, R&D, and initial marketing?

  • Acquisition financing
  • Early stage financing (correct)
  • Turnaround financing
  • Expansion financing

In which stage of financing does the firm acquire another company for further growth?

  • Acquisition financing (correct)
  • Early stage financing
  • Expansion financing
  • Turnaround financing

What type of financing enables operating groups or investors to acquire an existing product line or business?

<p>Management buyout financing (D)</p> Signup and view all the answers

Which type of capital gains tax applies to profits made on investments held for a short period?

<p>Short-Term Capital Gains Tax (B)</p> Signup and view all the answers

What feature is NOT characteristic of Venture Capital investments?

<p>Quick Liquidity (A)</p> Signup and view all the answers

What is the typical percentage of profits paid to the VCF's management company as a performance incentive?

<p>20% (C)</p> Signup and view all the answers

Which of the following is NOT an exit option for Venture Capital to cash out their investment?

<p>Mutual fund investment (C)</p> Signup and view all the answers

What is one disadvantage of Venture Capital financing?

<p>Loss of founder's autonomy and control (A)</p> Signup and view all the answers

Which party receives an annual management fee up to 2% of the committed capital in a Venture Capital Fund?

<p>General partners (C)</p> Signup and view all the answers

What type of tax is paid on profits earned from the sale of investments held for less than a year?

<p>Short-term capital gains tax (A)</p> Signup and view all the answers

Which of the following is NOT an advantage of Venture Capital financing?

<p>No obligation to repay the money (B)</p> Signup and view all the answers

What percentage of profits have strong limited partners in top-tier venture firms commanded in recent times?

<p>25% to 30% (B)</p> Signup and view all the answers

Under Indian Tax laws, how are exit gains on the sale or buyback of securities taxed for beneficiaries of the fund?

<p>Taxed at a progressive rate based on the profit amount (D)</p> Signup and view all the answers

What is the tax rate for short-term capital gains for an individual resident in India?

<p>30.90% (B)</p> Signup and view all the answers

When there are long-term capital gains from listed shares in India, subject to STT, what is the tax implication for residents and non-residents?

<p>No tax for residents; 15% for non-residents (A)</p> Signup and view all the answers

What is the tax rate for long-term capital gains on unlisted shares for a non-resident in India without indexation benefit or subject to off-market transactions?

<p>20.60% (A)</p> Signup and view all the answers

When are short-term capital gains considered to be taxed at the marginal rate of tax?

<p>When the investor is a resident in India (B)</p> Signup and view all the answers

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