Tax exemption: The latest news has indeed proven to be helpful for sovereign wealth funds and pension funds. The central government made an announcement on November 5, 2022 regarding the tax exemption on investments made in India and how it would now last till 2030. As per media reports, the Department of Revenue has confirmed it today on Saturday. The announcement was made through the Union Budget earlier this year. Because of these tax exemptions, sovereign wealth funds and pension funds are eligible for tax exemptions on income received from investments made in India in the form of dividends, interest and long term capital gains. The main goal of this exemption is to attract foreign capital to India for an extended period of time due to the increasing demand for infrastructure in the telecom, energy, logistics sectors and other crucial parts of the economy.The tax exemption rule was introduced five years ago.The government implemented Section 10 (23FE) in the Income Tax Act in the year 2020. It allowed for exemption, under certain conditions, for tax on dividend, interest and long term capital gains on investment in some infrastructure businesses. Such exemption is available only for the investments made after 1 April 2020. It serves the purpose of trying to attract foreign investment for an extended period into crucial infrastructure projects of the country. Earlier, this exemption was available only up to 31 March 2024 which was later modified to 31 March 2025. As per her statement in Interim Union Budget 2024-25, this was proclaimed by Finance Minister Nirmala Sitharaman.What are Sovereign Wealth Fund and Pension Fund?A Sovereign Wealth Fund refers to an investment fund owned by a government. The fund is used to raise money in the form of sovereigns, trade surplus, oil reserves, or government profits. Norway’s Government Pension Fund Global, Abu Dhabi Investment Authority, as well as GIC and Temasek Holdings are examples of sovereign wealth funds. Now talking about pension fund, it is an employed based retirement savings fund that collects money from employers and employees, and further invests it. It is used to pay pension every month to retired people. Such as Canada Pension Investment Board.
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