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    CBDT notifies amendment on tax exemption for Sovereign Wealth Funds for investment in infra

    Synopsis

    The Central Board of Direct Taxes notified the amendment, which was first announced in the Union Budget in February, and has widened the definition of infrastructure to include sub-sectors of transport, logistics, energy, water and sanitation, communication, social and commercial infrastructure.

    Agencies
    Experts said the move would propel India growth story and fund its aspiration to achieve a $5 trillion economy which required a comprehensive re-boot of hard and soft infrastructure.
    Income from dividend, interest and long term capital gains of sovereign wealth funds, the Abu Dhabi Investment Authority and pension funds, through investments made in infrastructure companies – via debt or equity – in India will be exempt from income tax.

    The Central Board of Direct Taxes notified the amendment, which was first announced in the Union Budget in February, and has widened the definition of infrastructure to include sub-sectors of transport, logistics, energy, water and sanitation, communication, social and commercial infrastructure.

    “This notification shall come into force from the 1st day of April, 2021 and shall be applicable for AY 2021-22 and subsequent assessment years,” the Board said Tuesday.

    The notification would incentivise foreign investors to invest in thirty four defined infrastructure sectors directly or through vehicles such as Alternate investment funds or Infrastructure Investment Trusts. CBDT has aligned the sectors with the harmonised master list of infrastructure notified by Department of Economic Affairs in August, 2018.

    Experts said the move would propel India growth story and fund its aspiration to achieve a $5 trillion economy which required a comprehensive re-boot of hard and soft infrastructure.

    “Pursuant to this notification, investing in India infrastructure would turn attractive, unmindful of hasty down grade of country ratings and allow long term stable capital to chase high quality infrastructure project,” said Aravind Srivatsan, Partner, Nangia Andersen LLP.

    Capital formation would flow into social infrastructure such as educational institutions, sports stadiums, tourism, operationalise long pending investment creation of theme based parks including food parks, multi-modal logistics parks and textile park, besides driving investments in city gas distribution network, bulk material transportation pipelines, urban public transport and rail infrastructure.

    “Considering India's need for huge investment in infrastructure this will attract sovereign funds to a more diverse range of infrastructure companies into sectors like telecom, energy, logistics, hospitals, cold chains, etc,” Amit Maheshwari, tax partner at AKM Global said.
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