The Finance Bill, 2025, proposes amendments to Section 10(23FE) of the Income-tax Act to extend the deadline for investments by Sovereign Wealth Funds (SWFs) and Pension Funds (PFs) from March 31, 2025, to March 31, 2030. The clause exempts specified incomes, including dividends, interest, and long-term capital gains, arising from investments in India’s infrastructure sector from tax. This extension aims to provide a stable timeframe for global investors to contribute significantly to India’s infrastructure development. Additionally, the amendment clarifies that long-term capital gains, even if reclassified as short-term under Section 50AA, will continue to qualify for exemptions under Section 10(23FE). This revision addresses concerns raised following the Finance (No. 2) Act, 2024, which reclassified all capital gains from unlisted debt securities as short-term, potentially impacting SWFs and PFs. The proposed changes align with the government’s objective of fostering long-term investments in the country’s infrastructure while offering clarity and continuity in tax benefits. These amendments will be effective from April 1, 2025.
Budget 2025: Extension of date of making investment by Sovereign Wealth Funds, Pension Funds & others and rationalisation of tax exemptions
Clause (23FE) of section 10 of the Act provides for the exemption to specified persons from the income in the nature of dividend, interest, long-term capital gains or certain other incomes arising from an investment made by it in India. Specified persons inter alia are Sovereign Wealth Fund (SWF), Pension Fund (PF) which fulfills conditions prescribed therein and are specified for this purpose by the Central Government through notification in the Official Gazette. This provision was introduced through the Finance Act, 2020 to encourage investments of SWF and PF into infrastructure sector of India.
2. Sub-clause (i) of clause (23FE) of section 10, inter alia, provides that investment is made on or after the 1st day of April, 2020 but on or before the 31st day of March, 2025.
3. Suggestions have been received that given the long-term nature of infrastructure investments and the role of foreign SWFs and PFs in financing such projects, the deadline for investment under clause (23FE) of section 10 be extended. This will provide the stability and time frame necessary for global investors to make substantial contribution to India’s infrastructure development.
4. Further, the amendments to section 50AA by Finance (No. 2) Act, 2024, have re-classified all the capital gains from unlisted debt securities as short-term capital gains, irrespective of the holding period. This will result in the long term capital gains from investment in unlisted debt investments to be taxable in the hands of SWFs and PFs. Prior to the said amendments, notified SWFs or PFs were eligible for exemptions on long-term capital gains from unlisted debt securities under clause (23FE) of section 10.
5. It is, therefore, proposed to amend clause (23FE) of section 10, so as to provide that,–
(I) 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 it in India, shall inter alia not be included in the total income of a specified person under clause (23FE) of section 10; and
(II) the date of investment under the said clause shall extended from 31st day of March, 2025 to 31st day of March, 2030.
6. These amendments will take effect from the 1st day of April, 2025.
[Clause 6]
Extract of Relevant Clauses of Finance Bill, 2025:
Clause 6 of the Bill seeks to amend section 10 of the Income-tax Act relating to incomes not included in total income.
Clause (23FE) of the said section 10, inter alia, provides that income of the nature of dividend, interest, any sum referred to in clause (xii) of sub-section (2) of section 56, or longterm capital gains arising from an investment made in India, shall not be included in computing the total income of a specified person. Sub-clause (i) of the said clause provides that the investment is to be made on or after 1st April, 2020 but on or before 31st March, 2025.
It is proposed to amend the opening portion of the said clause so as to provide that income in the nature of long-term capital gains (whether or not such capital gains are deemed as short-term capital gains under section 50AA), shall not be included in computing the total income of a specified person.
It is further proposed to amend sub-clause (i) of the said clause so as to extend the date of investment from 31st March, 2025 to 31st March, 2030.
These amendments will take effect from 1st April, 2025.
Extract of Relevant Amendment Proposed by Finance Bill, 2025:
Amendment of section 10.
In section 10 of the Income-tax Act
(g) in clause (23FE),––
(i) in the opening portion, after the words “long-term capital gains”, the brackets, words, figures and letters “(whether or not such capital gains are deemed as short-term capital gains under section 50AA)” shall be inserted;
(ii) in sub-clause (i), for the figures “2025”, the figures “2030” shall be substituted;
