The Central Board of Direct Taxes (CBDT) on 9th May 2022, has issued a set of guidelines on the Income Tax Act provisions giving tax exemption to sovereign wealth funds (SWFs) and pension funds on their income from infrastructure investments in India.
The guidelines seeks to bring more clarity on aspects like the riders attached to the tax incentive such as a three-year lock in period for the investments, computation of capital gain from transfer of investments, computation of the income from eligible investments on which tax exemption is available, tax audits and quarterly statement of investments.
Pension funds and SWFs putting their money directly or indirectly in the infrastructure sector through companies, infrastructure investment trusts, alternative investment funds, Infrastructure finance companies or infrastructure debt funds are eligible for total tax exemption on their income from these investments.
Section 10 (23 FE) of the Income Tax Act exempts the income earned from investments channelled into the infrastructure sector through these entities. The tax incentive covers income which is in the nature of dividend, interest or long-term capital gains arising from investments made in India between 1 April 2020 and 31 March, 2024.
Further the fund will have to fulfil several other conditions to get the exemption. Including filing of income tax return for the years that the investment is made till the time its liquidated, auditing of its books etc.
