economy

Pension, sovereign wealth funds show appetite for India infra investments

Pension, sovereign wealth funds show appetite for India infra investments

NEW DELHI: School Employees Retirement System of Ohio, an Ohio-based pension fund, has become the latest among over a dozen foreign investors to get income tax exemption for infrastructure investments in India, showed an official order. The Central Board of Direct Taxes (CBDT) has said tax concession is applicable on investments made between Tuesday and end of March 2024 subject to riders. The investor has to file income tax returns and have to maintain segmented account of income and expenditure regarding the investments made and has to continue to be regulated under the law of the state of Ohio, US, the order said. Also, the investment has to be held for at least three years. The tax incentive was introduced in the Income Tax Act by way of Finance Act 2020 and 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 or unit. The rising number of investors opting for the tax break indicates 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. Earlier this year, CBDT granted tax exemption to Singapore-based sovereign wealth funds Chiswick Investment Pte. Ltd., Stretford Investment Pte. Ltd., Dagenham Investment Pte. Ltd., Anahera Investment Pte. Ltd., Bricklayers Investment Pte. Ltd., and UAE’s sovereign wealth fund MIC Redwood 1 RSC Ltd. Around seven Canadian pension funds including CDPQ Fixed Income XI Inc., OMERS Administration Corp. and Ivanhoe Logistics India Inc. as well as Australian pension fund Government Employees Superannuation Board and UK’s development finance institution CDC Group Plc. are among the others that have been given similar income tax breaks for infrastructure investments in India. 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. Download.

economy 2021-11-03 Livemint