The central government has given major relief to Sovereign Wealth Funds (SWFs) and Pension Funds by extending the tax exemption on their investments in India.
This exemption will now be available until March 31, 2030, according to a recent media report.
The Department of Revenue officially notified this update on Saturday. The announcement was originally made during this year’s Union Budget.
Due to this tax exemption, these funds will not have to pay tax on income earned through dividends, interest, and long-term capital gains from their investments in India.
The aim is to encourage long-term foreign investment in key sectors such as infrastructure, telecom, energy, and logistics, where demand is growing rapidly.
Background: When Was the Tax Exemption Introduced?
The government introduced this benefit about five years ago in 2020 by adding Section 10(23FE) to the Income Tax Act.
This section allows tax exemption on income from investments made in specific infrastructure projects, provided certain conditions are met.
These rules apply to investments made after April 1, 2020.
Originally, the tax exemption was valid only until March 31, 2024. Later, it was extended to March 31, 2025,
and now, it has been extended further to March 31, 2030, as announced by Finance Minister Nirmala Sitharaman in the Interim Union Budget for 2024-25.
What Are SWFs and Pension Funds?
A Sovereign Wealth Fund (SWF) is a government-owned investment fund, typically created from national reserves such as earnings from oil exports or trade surpluses. Well-known examples include:
Norway’s Government Pension Fund Global
Abu Dhabi Investment Authority (ADIA)
GIC and Temasek Holdings (Singapore)
A Pension Fund, on the other hand, is a retirement savings fund. It collects money from employees
and employers and invests it to provide monthly pension payments to retired individuals. A major example is the Canada Pension Investment Board.
