CBDT extends tax relief for SWFs, pension funds to March 31, 2025

The Central Board of Direct Taxes (CBDT) has extended the tax relief for sovereign wealth funds (SWFs) and pension funds by a year to March 31, 2025, against the previous expiry of March 31, 2024.

With the changes, the funds can now enjoy exemption from tax on dividend income, interest income, or long-term capital gains tax arising from investments made in India.

Though the announcement was first made in the interim budget earlier this year, the tax authority notified the changes on July 18.

“While it's a move that will be welcomed by the infrastructure sector and infrastructure funds, given the long haul of these projects and India's long-term aspirations, the extension should have been considered for a longer duration as the investment needs are unlikely to be met in one year,” said Sunil Gidwani, partner - financial sector, Nangia Andersen LLP.

Section 10(23FE) of the Income Tax Act provides an exemption to sovereign wealth funds and pension funds (specified fund) on income from dividends, interest, and long-term capital gains from investment in infrastructure made in India after April 2020.

As per data on NSDL, sovereign wealth funds’ assets under custody as of June stood at Rs 5.25 trillion, while that for pension funds was to the tune of Rs 6.02 trillion.

However, funds have to meet certain conditions to avail the tax relief.