100% Tax Exemption on Investment in Sovereign Funds

100% Tax Exemption on Investment in Sovereign Funds National Infrastructure Pipeline (Section 80-IA)

Per Budget 2020, FM has announced a 100 percent tax exemption on the returns on Investment made in National Infrastructure Pipeline( Allocated Rs 103 Cr.) informs both equity & debt. It’s available to sovereign wealth funds, namely Abu Dhabi Investment Authority as well as any entity wholly owned and controlled, directly or indirectly, by a foreign government.

 Sovereign funds, willing to invest in India’s story in Infrastructure growth, can write to the Finance Ministry along with their project details as it enables choice for funds to invest through incorporated entities rather than investing directly. Every case based on merits of the details will be vetted by the Department of Revenue  and as per the scheme, Sovereign funds will be notified for exemption under Section 80-IA of the Income Tax Act.

Tax exemption for the Infra. Related Instruments will cover –

• Dividend
• Interest or
• Long-term capital gains arising from a debt or equity

 The major condition is that Invested Funds should be used in a “company or enterprise carrying on the business of developing, or operating and maintaining, or developing, operating or maintaining any infrastructure facility” as specified by the law.

• The infrastructure projects will include:
• Road, a bridge or a rail
• Highway project including housing or other activities being a part of the highway project.Water supply project, water treatment system, irrigation project, sanitation, and sewerage system or solid waste management system.
• Port, airport, inland waterway, inland port or navigational channel in the sea.

The investment needs to have been made before March 31, 2024, and held for at least three years.

A hundred percent deduction for any profits and gains from an investment will be available for 10 consecutive years, according to the Finance Bill.

National Infrastructure Pipeline Project timelines broadly cover a time frame from 2019-20 to 2024-25. These projects have been identified in sectors such as energy, roads, railways, ports and airports, digital infrastructure projects, mobility projects, irrigation, rural, agriculture and food processing.

Projects worth about Rs 25 lakh crore have been identified in the energy sector followed by road projects worth Rs 20 lakh crore.

Some of the other funds that eye to invest in the Govt of India scheme are:-

• Norway’s Government Pension Fund Global with $1.2 trillion in investments
• Singapore’s Temasek—an investment fund with a $313-billion portfolio.
• Public Investment Fund of Saudi Arabia
• Mubadala Investment Company of UAE
• GIC Pvt. Ltd., Kuwait Investment Authority,  & Temasek Holdings

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