New Delhi: The Central Board of Direct Taxes (CBDT) has granted income tax exemption to the earnings that Qatar Holding LLC., a sovereign wealth fund, will make from its infrastructure investments in India, showed an official order.
The tax incentive is applicable on the investments made between Friday and 31 March 2024 under a provision in the Income Tax Act meant to attract investments into infrastructure sector. The benefit, however, is subject to riders.
The conditions include the investor filing tax returns, getting its books of account audited and filing quarterly reports on the investments made.
“The assessee shall continue to be owned and controlled, directly or indirectly, by the Government of Qatar, and at no point of time should any other person have any ownership or control, directly or indirectly, in the assessee,” CBDT said as one of the riders. The income tax benefit introduced by way of Finance Act of 2020 is in effect from 1 April 2021. The relief is given under section 10 of the Income Tax Act which deals with earnings not to be included in the taxable income.
It covers income of the notified person in the nature of dividend, interest or long-term capital gains arising from an investment in India, whether in the form of debt or share capital.
The rising number of investors opting for this tax break indicates the growing appetite among sovereign wealth funds and pension funds for India’s infrastructure sector at a time the government is betting on its multiplier effect to support economic growth.
The government’s pipeline of about 7000 identified infrastructure projects have a total cost of about ₹111 trillion. The risks involved in long gestation infrastructure projects means normal bank lending is not enough to finance these projects. Pension funds and sovereign wealth funds help to fill this gap in financing projects.