Guidelines under clause (23FE) of section 10 of the Income-tax Act, 1961

Last updated: 17 November 2021

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This circular provides updated guidelines on clause 23FE of the Income-tax Act, 1961, concerning tax exemptions for sovereign wealth funds and pension funds investing in Indian infrastructure. It clarifies the conditions related to loans and borrowings, specifically addressing concerns about indirect borrowing and defining when such funds remain eligible for exemption.

Circular No. 19 of 2021-CBDT F. No. 370142/48/2021-TPL Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes (TPL Division) Dated: 26thOctober, 2021 Sub.: Guidelines under clause (23FE) of section 10 of the Income-tax Act, 1961 reg. Finance Act, 2020,inter-alia,inserted clause (23FE) of section 10 of the Income-tax Act, 1961 (hereinafter referred to as the Act) to provide for exemption to sovereign wealth funds and pension funds (hereinafte

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FAQ :

Clause 23FE of the Income-tax Act, 1961, provides tax exemption to sovereign wealth funds and pension funds on their income from investments in Indian infrastructure made between 01.04.2020 and 31.03.2024, subject to certain conditions.

If a specified fund or its group concern has loans or borrowings specifically for the purpose of making an investment in India, the fund is not eligible for exemption under clause 23FE.

If loans and borrowings are taken by the specified fund or its group concern but not specifically for Indian investment, it will not be presumed that the Indian investment is funded by these loans. The fund remains eligible for exemption if other conditions are met and the investment source is not from such loans.

A 'specified fund' refers to sovereign wealth funds and pension funds.

Income in the nature of dividend, interest, and long-term capital gains arising from investment in infrastructure in India are eligible for exemption.

Investments in infrastructure in India must be made between 01.04.2020 and 31.03.2024 to be eligible for exemption.

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Notification No : Circular No. 19 of 2021-CBDT
Published in Income Tax
Source : https://incometaxindia.gov.in/communications/circular/circular-19-2021.pdf

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