The Indian government has extended a crucial tax exemption for Sovereign Wealth Funds (SWFs) and Pension Funds for another five years, now valid until March 31, 2030. This move, formalized by the Department of Revenue, aims to attract significant long-term foreign capital into India’s rapidly expanding infrastructure and other vital sectors like telecom, energy, and logistics.
The exemption, originally introduced in 2020 under Section 10(23FE) of the Income Tax Act, provides relief on income from dividends, interest, and long-term capital gains generated from eligible investments in India. This extension, which follows an earlier one to March 31, 2025, underscores the government’s commitment to fostering a favorable environment for global investors.
This policy has already shown considerable success, with direct investments by SWFs and pension funds nearly doubling in 2022. According to NSDL data, assets managed by SWFs in Indian companies saw a remarkable 60% year-on-year increase, reaching ₹4.7 lakh crore by April 2024. Noted global funds like Norway’s Government Pension Fund Global and the Canada Pension Plan Investment Board are among the around 35 entities already benefiting from this exemption.
The extension provides a more stable and attractive horizon for these large global funds to channel investments into India’s substantial infrastructure needs, which are estimated to be over $1 trillion in the urban sector alone over the next 15 years. While some stakeholders have advocated for an even longer duration, this five-year extension is expected to continue boosting long-term capital flows into critical development projects across the country.