Under the Income-tax Act, 1961, specified persons such as Sovereign Wealth Funds (SWFs) and Pension Funds (PFs) currently enjoy exemptions on certain incomes from infrastructure investments if made by March 31, 2025. The Finance Bill 2025 introduces two key amendments: extending the investment deadline to March 31, 2030, and continuing the exemption for long-term capital gains, even if deemed short-term under section 50AA, from investments in India. This extension is designed to encourage long-term infrastructure investments and provide a stable timeframe for global investors to contribute to India’s infrastructure. Additionally, the long-term capital gains exemption is preserved despite the recent reclassification of certain capital gains as short-term under section 50AA, ensuring tax certainty for foreign investors in infrastructure projects.
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- FAQs: Extension of date of making investment by Sovereign Wealth Funds, Pension Funds and others: Budget 2025
- Q.1. What are current provisions relating to specified persons like Sovereign Wealth Funds (SWFs) and Pension Funds (PFs) under Income-tax Act, 1961?
- Q.2. What changes have been brought in current provisions relating to Sovereign Wealth Fund (SWF) and Pension Fund (PF)?
- Q.3. Why deadline/time period for making investment has been extended?
- Q.4. Why exception has been carved out for long-term capital gains otherwise exempted under section 10(23FE) from applicability of provisions of section 50AA?
FAQs: Extension of date of making investment by Sovereign Wealth Funds, Pension Funds and others: Budget 2025
Q.1. What are current provisions relating to specified persons like Sovereign Wealth Funds (SWFs) and Pension Funds (PFs) under Income-tax Act, 1961?
Ans. Under the current provisions, specified persons (such as sovereign wealth funds and pension funds) may avail exemption on certain income like interest, dividend, long term capital gains on their investment in infrastructure sectors, if such investment is made by 31/03/2025.
Q.2. What changes have been brought in current provisions relating to Sovereign Wealth Fund (SWF) and Pension Fund (PF)?
Ans. Two amendments have been proposed by the Finance Bill, 2025 viz.-.
(i) For claiming exemption, specified persons (such as sovereign wealth funds and pension funds) are as of now required to make investment by 31/03/2025. The said date has been extended to 31/03/2030.
(ii) It has been provided that long-term capital gains (whether or not such capital gains are deemed as short-term capital gains under section 50AA) arising from an investment made by such persons in India, shall continue to be exempted.
Q.3. Why deadline/time period for making investment has been extended?
Ans. Considering the long-term nature of investments in the infrastructure sector and in order to provide the stability and time frame necessary for global investors to take decision and make substantial contribution to India’s infrastructure development, the deadline for making investment has been extended.
Q.4. Why exception has been carved out for long-term capital gains otherwise exempted under section 10(23FE) from applicability of provisions of section 50AA?
Ans. The amendments to section 50AA by Finance (No. 2) Act, 2024, have re-classified all the capital gains from unlisted debt securities or market linked debentures or specified mutual funds as short-term capital gains, irrespective of the holding period.
Prior to the said amendments, notified SWFs or PFs were eligible for exemptions on long- term capital gains from investment made in India (whether in the form of debt or share capital of unit) under clause (23FE) of section 10.
Given the significance of foreign SWFs and PFs in financing infrastructure projects, tax certainty has been provided by continuing the exemption.
