Finance Minister Nirmala Sitharaman proposed a 100% tax exemption for the Sovereign Wealth Fund of foreign governments.
“In order to incentivize the investment by the Sovereign Wealth Fund of foreign governments in the priority sectors, I propose to grant 100% tax exemption to their interest, dividend and capital gains income in respect of investment made in infrastructure and other notified sectors before 31st March 2024 and with a minimum lock-in period of 3 years,” said Finance Minister in her budget speech.
Apart from the National Investment and Infrastructure Fund (NIIF) – the country’s only sovereign Foreign wealth fund Investments, India has already seen a large pool of infrastructure investments by global sovereign wealth funds such as the Middle East based Abu Dhabi Investment Authority, etc and Singapore based GIC, etc.
The government believes that such tax exemption coupled with the abolition of dividend distribution tax (DDT) will give benefits to the global yield-seeking infrastructure investors in India and will also help accelerate further investments in the sector as a number of SWFs are already significantly invested or are considering investing in the Indian infrastructure sector. The said amendments are proposed to section 80-IA of the Income Tax Act.
The government will provide tax exemptions for a sovereign wealth fund which is wholly owned and controlled, directly or indirectly, by the Government of a foreign country and it is set up and regulated under the law of such a foreign country.
