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Sovereign wealth funds to get tax relief on infrastructure bets: CBDT

Sovereign wealth funds to get tax relief on infrastructure bets: CBDT

Investments by sovereign wealth funds (SWFs) and pension funds in 34 key infrastructure sectors including hotels, cold chains, educational institutions, hospitals and gas pipelines will get tax exemptions on some categories of incomes, the Central Board of Direct Taxes (CBDT) said on Tuesday.

In this regard, the CBDT aligned the definition of infrastructure with the harmonised master list of infrastructure sub-sectors notified by the Department of Economic Affairs in August, 2018.

These changes were proposed in the Budget and the Finance Act, 2020, provided the wholly-owned subsidiary of Abu Dhabi Investment Authority, SWFs and pensions funds exemptions on interest income, dividends and capital gains arising out of investment in infrastructure in India.

The alignment broadens the scope of the move as the master list includes sub-sectors such as infrastructure for special economic zones (SEZs), textile parks, agriculture markets, telecom towers, electricity generation, transmission and distribution, apart from ports and airports.

“This notification shall come into force from the 1st day of April, 2021 and shall be applicable for AY (assessment year) 2021-22 and subsequent assessment years,” the Central Board of Direct Taxes said on Tuesday. Investments have to be made before March 31, 2024, and with a minimum lock-in period of 3 years, FM Nirmala Sitharaman had said in her Budget speech, when she announced the move.

With this, the government is looking to incentivise investment in these sectors either directly or through vehicles such as alternate investment funds (AIFs) or Infrastructure Investment Trusts.

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