Government of India has extended the tax exemption granted to Sovereign Wealth Funds (SWFs) and Pension Funds (PFs) investing in India from March 31, 2025, to March 31, 2030. This move, announced by the Department of Revenue, aims to attract long-term foreign investment in India’s infrastructure, energy, logistics, a Income Tax Act, 1961.
in 2020, will continue to provide tax relief on dividends, interest, and long-term capital gains for eligible investments.
Key Highlights
Original Provision: Introduced in Union Budget 2020, Section 10(23FE) provided tax exemption on income in the form of:
- Dividends
- Interest
- Long-term capital gains
arising from investments by notified SWFs and PFs in eligible infrastructure sectors.
New Timeline:
- Original validity: April 1, 2020 – March 31, 2024
- Previously extended to: March 31, 2025
- Now extended to: March 31, 2030
Eligible Sectors for Investment:
- Roads, Highways, Ports, Power, Airports, Warehousing, Telecom, Urban Transit, Renewable Energy, etc.
Objective: To attract long-term, patient foreign capital for India’s infrastructure and green transition goals, especially in light of initiatives like:
- National Infrastructure Pipeline (NIP)
- PM Gati Shakti
Impact of the Policy
- Rising Investment Trends:
- SWF investment in India rose from $3.8 billion (2021) to $6.7 billion (2022)
- As of April 2024, SWF holdings in Indian companies grew 60% YoY, reaching ₹4.7 lakh crore (NSDL data)
- Number of Funds Approved: Around 35 global funds approved to avail the exemption, including:
- GIC & Temasek (Singapore)
- Kuwait Investment Authority
- Norwegian Pension Fund
- Sama Foreign Holdings (Saudi Arabia)
- Clarifications Added:
- Tax exemption extended to long-term capital gains from unlisted securities like bonds and debentures held over 2 years, aligning debt and equity tax rules.
Conditions for Exemption
- Must be a notified SWF or Pension Fund.
- Assessee must:
- File I-T returns for every assessment year post-investment.
- Not engage in commercial activity (India or abroad), except eligible investments.
- Not control or manage day-to-day operations of the investee.
- Have a monitoring mechanism to safeguard investment but not exercise executive authority.
Why This Matters?
Strategic Capital:
- Ensures predictability and stability for global investors, encouraging investment in long-term infrastructure.
Green Transition & Development:
- Supports India’s energy transition, logistics modernization, and 2030 development targets.
International Confidence:
- Enhances India’s image as an investment-friendly destination for large global funds.
Key Facts
- Section 10(23FE), Income Tax Act, 1961: Provides tax exemption for notified SWFs & PFs.
- SWFs: State-owned investment funds; e.g., GIC (Singapore), Abu Dhabi Investment Authority.
- Pension Funds: Investment pools for retirement savings; e.g., Canadian Pension Plan Investment Board.
- NSDL (National Securities Depository Limited): One of the central securities depositories in India.
- PM Gati Shakti: National Master Plan for multi-modal connectivity.