Business Today
Loading...

Abu Dhabi's SWF becomes first notified fund to get 100% income tax exemption

The government has extended many tax concessions for sovereign funds to attract long-term investments in India's infrastructure sector

twitter-logoDipak Mondal | November 3, 2020 | Updated 16:04 IST
Abu Dhabi's SWF becomes first notified fund to get 100% income tax exemption
CBDT has notified tax exemption to MIC Redwood 1 RSC Limited's investments in India, making it the first notified SWF which will be availing this exemption

Abu Dhabi's Sovereign Wealth Fund (SWF) -- MIC Redwood 1 RSC Limited -- has become the first foreign SWF that has been notified and granted 100% income-tax exemption for the long-term investments to be made in the specified priority sectors in India.

The government has extended many tax concessions for sovereign funds to attract long-term investments in India's infrastructure sector. The MIC Redwood 1 RSC Limited of Abu Dhabi has been provided 100% income-tax exemption to income from interest, dividend and long-term capital gains for its investment in India's priority sector as per the Finance Act, 2020.  

CBDT has notified tax exemption to MIC Redwood 1 RSC Limited's investments in India, making it the first notified SWF which will be availing this exemption. "This 100% income-tax exemption facility was well received by the SWFs and Pension Funds across the globe and a large number of SWFs and Pension Funds have shown interest in making investment in India's infrastructure sector," said a finance ministry official.  

It may be noted that CBDT has issued detailed guidelines on 22 July 2020 to facilitate the process of SWFs' notification. Notified foreign Pension Funds were also granted similar exemption subject to fulfilment of certain prescribed conditions.  

A finance ministry official said on the condition of anonymity that to expedite foreign investment in India's priority areas during the COVID-19 pandemic, the process of notification of the MIC Redwood 1 RSC Limited was completed in a record time. On 18 September 2020, the MIC Redwood 1 RSC Limited made application for seeking tax-exemption notification as per the CBDT guidelines.

All deliberations and meetings between applicant and tax authorities were held virtually through video conferencing and communications were made only through emails. The MIC Redwood 1 RSC Limited submitted its final replies on 20 October 2020 and after that the process of notification including consultation with Ministry of Law and Justice for legal vetting of the notification was completed in less than two weeks; and with the completion of all legal and other formalities the notification granting 100% tax-exemption was issued on 2 November 2020.

The government, in order to incentivise long-term investment by the SWFs of the foreign governments in the priority sectors, had granted through the Finance Act, 2020 a 100% income-tax exemption to income of a notified SWF in respect of its investment made in the specified infrastructure sectors.

The income-tax exemption to SWFs and the Pension Fund is expected to provide much needed foreign funding to the infrastructure sector and will a go a long way in boosting the growth in the infrastructure sector. The government had issued a notification on 6 July 2020 to broaden the scope of this exemption and made all sub-sectors of Harmonised Master List of the infrastructure eligible for this income-tax exemption.

Also read: RIL Q2 results: $1 bn investment likely from ADIA, PIF in Jio's fibre network

Also read: PayPal reports surge in quarterly revenue, profits; shares fall over 6%

  • Print
  • COMMENT
BT-Story-Page-B.gif
A    A   A
close