Extension of date of making investment by Sovereign Wealth Funds, Pension Funds & others
and rationalisation of tax exemptions
The Finance Bill, 2025, proposes several key changes in the Income Tax Act, 1961, to continue reforms in the direct tax system through tax reliefs, removing difficulties faced by taxpayers, and rationalizing1 various provisions. Here are some of the key changes:
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
17
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]