Sovereign Funds Investing In Energy, Communications Sectors To Get Tax Exemptions
The notification will come into effect from April 1, 2021.
India will offer tax exemption on returns that sovereign funds would earn for their investments, be it equity or debt, into transport, logistics, energy, water and sanitation, communications, social and commercial infrastructure projects.
This will come into effect from April 1, 2021, and shall be applicable for financial year 2020-21 or assessment year 2021-22 and subsequent assessment years, the Finance Ministry said in notification.
Finance Minister Nirmala Sitharaman had in her Budget 2020 speech said that investments made by sovereign wealth funds into infrastructure before March 31, 2024, for a minimum period of three years, will be granted tax exemption on interest, dividend and capital gains. This has been done to promote investments by sovereign wealth funds into the country, she had said.
The tax exemption will boost private sector participation in infrastructure development. That too at a time India said it would spend about Rs 111 lakh crore on infrastructure projects through its National Infrastructure Pipeline through 2019-2025.
The government has widened the scope of eligible infrastructure sectors for tax exemption that will now include telecom sector, a move that will cover the investments made by Abu Dhabi Investment Authority into Jio Platforms Ltd., said Gaurav Mohan, chief executive officer at AMRG & Associates—tax consultancy firm.
The sovereign wealth fund owned by the Emirate of Abu Dhabi will invest Rs 5,683.5 crore to buy a 1.16% stake in Reliance Industries Ltd.’s subsidiary.
This move, according to Mohan, will attract more and more investments in critical areas of the infrastructure sector, and aid India’s growth. It will also aid the government’s investment target for the National Infrastructure Pipeline.