Government Extends Tax Exemption for Sovereign Wealth and Pension Funds Until 2030

The Indian government has extended tax exemptions for Sovereign Wealth Funds and pension funds until March 31, 2030. This move aims to attract foreign investments in critical sectors like infrastructure and energy. The tax relief, which includes exemptions on dividends, interest, and long-term capital gains, was initially introduced in 2020 and has now been extended to support the growing demand for foreign capital in India. Understanding the roles of these funds is crucial, as they play a significant part in the country's economic landscape.

By Narendra Chaudhary Jul 12, 2025, 17:16 IST

Tax Relief for Sovereign Wealth and Pension Funds

The Indian government has announced a significant extension of tax relief for Sovereign Wealth Funds (SWFs) and pension funds. This tax exemption on investments made in India has been extended for an additional five years, now lasting until March 31, 2030. This information was revealed in a recent media report, and the Department of Revenue officially notified this change on Saturday. The announcement was initially made during this year's Union Budget.

Benefits of the Tax Exemption

Thanks to this tax exemption, SWFs and pension funds will enjoy relief from taxes on income generated from dividends, interest, and long-term capital gains from their investments in India. The primary goal of this initiative is to attract foreign capital for long-term investments in critical sectors such as infrastructure, telecommunications, energy, and logistics, amidst rising demand.

Background of the Tax Exemption Rule

The tax exemption rule was first introduced by the government in 2020 under Section 10(23FE) of the Income Tax Act. This provision allows for certain investments in specific infrastructure businesses to be exempt from taxes on dividends, interest, and long-term capital gains under certain conditions. Initially applicable to investments made after April 1, 2020, the exemption was set to expire on March 31, 2024, but was later extended to March 31, 2025, as announced by Finance Minister Nirmala Sitharaman in the interim Union Budget for 2024-25.

Understanding Sovereign Wealth and Pension Funds

Sovereign Wealth Funds are government-owned investment funds that typically gather capital from a country's reserves, which may include earnings from oil exports, trade surpluses, or other government profits. Notable examples include the Norwegian Government Pension Fund Global, Abu Dhabi Investment Authority (ADIA), and GIC, Temasek Holdings. On the other hand, pension funds are retirement savings funds that collect money from workers and employers, investing it to provide monthly pensions to retirees, such as the Canada Pension Investment Board.