Tax exemption: Big relief to foreign investors, sovereign wealth funds and pension funds will get tax exemption for five more years

The central government has further increased the tax exemption given to sovereign wealth funds and pension funds on investments made in India. The Department of Revenue notified it today on Saturday. An announcement related to this was made in the Union Budget this year. Know what these two funds are, why do they get exemption, when will it start and till when will it continue?

Tax exemption: The government has given a big relief to Sovereign Wealth Funds (SWFs) and Pension Funds. The tax exemption on investments made in India has been extended by the Central Government for five years i.e. till March 31, 2030. This has been revealed by a media report. The Department of Revenue notified it today on Saturday. The announcement related to this was made in the Union Budget this year. Due to this tax exemption, sovereign wealth funds and pension funds get tax relief on income from dividends, interest and long-term capital gains from investments in India. The purpose of this relief is that foreign capital should come here for a long time amid the growing demand for infrastructure as well as other important sectors including telecom, energy, logistics in India.

The tax exemption rule was introduced five years ago

The government introduced Section 10 (23FE) under the Income Tax Act about five years ago in the year 2020. Under this, under certain circumstances, dividend, interest and long term capital gains on investment in specific infrastructure business were exempted from tax. This exemption rule is applicable on investments made after 1 April 2020. Its aim is to bring large-scale foreign investment for a long time in important infrastructure projects of the country. Earlier this exemption was only till 31 March 2024, but then it was extended till 31 March 2025. This was announced by Finance Minister Nirmala Sitharaman in the Interim Union Budget 2024-25.

What are Sovereign Wealth Fund and Pension Fund?

Sovereign Wealth Fund is a government-owned investment fund. This money is usually raised through a country’s reserves, such as oil export earnings, trade surplus or other government profits. Some examples of sovereign wealth funds are Norway’s Government Pension Fund Global, Abu Dhabi Investment Authority (ADIA) and GIC, Temasek Holdings. Now talking about pension fund, it is a retirement savings fund that collects money from workers and employers and invests it. It is used to pay pension every month to retired people. Such as Canada Pension Investment Board.

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