SWFs, PFs show interest in ₹111-lakh crore NIP in India
Notwithstanding the second wave of Covid-19 pandemic in India, about two dozen global investors, mostly sovereign wealth funds (SWFs) and pension funds have sought tax benefits for investing in Indian infrastructure projects, and 15 of them have already been granted permission this month, two officials said.
The latest entity to get permission is Indo-Infra Inc, a Canadian pension fund, which has been allowed tax exemptions on any income in the nature of dividend, interest or long-term capital gains arising from its investments in specific infrastructure projects in India up to 2024, officials with direct knowledge of the matter said requesting anonymity.
The Finance Act, 2020 introduced a section 10(23FE) in the Income-tax Act, 1961, providing income-tax exemptions to notified funds from April 1, 2020 to March 31, 2024, subject to certain conditions. The Central Board of Direct Taxes (CBDT) issued notifications on July 22 and August 17 last year to specify the eligibility conditions for SWFs and pension funds.
“This shows that SWFs and pension funds are keen to invest in the ₹111-lakh crore National Infrastructure Pipeline(NIP),” said one of the officials.
In the second week of May, the government granted special dispensation to five funds, OMERS Administration Corporation (Canada), SWF of the Ministry of Economy and Finance (South Korea), Government Employees Superannuation Board (Australia), CDC Group Plc, and Public Sector Pension Investment Board (Canada), the official added.
Earlier, in the first week of May, nine such funds were notified, he said.
In her budget speech last year, finance minister Nirmala Sitharaman said: “In order to incentivise the investment by the SWFs in the priority sectors, I propose to grant 100% tax exemption to their interest, dividend and capital gains income in respect of investment made in infrastructure and other notified sectors before 31st March, 2024 and with a minimum lock-in period of three years.”
In order to attract investors, the government is also expanding a so-called harmonised master list (HML) of Infrastructure. HML refers to an exhaustive list of specified infrastructure projects that qualifies for fiscal incentives. Last week, it added ‘exhibition-cum-convention centres’ to the list. The inclusion will help in getting easy access to financing on better terms, the second official said.
Both the sub-sectors were included in one of the five HML categories—’social and commercial infrastructure’. Sub-groups under this category include, education Institutions, sports infrastructure, hospitals, post-harvest storage infrastructure, terminal markets, soil-testing laboratories and cold chain. The other four categories are transport and logistics, energy, water and sanitation, and communications.
Nilaya Varma, co-founder and chief executive officer of Primus Partners, said: “This is certainly a positive development, which should be capitalised. In fact, it is an outcome of PM Modi’s direct and effective interaction with SWFs and pension funds.”
Last year, PM Modi held a meeting with 20 global investors and invited them to become part of a ‘New India’ and its ambitious $5-trillion economy.