Abu Dhabi SWF gets full I-T waiver for infra investments

The government has notified Abu Dhabi’s MIC Redwood 1 RSC as the first sovereign wealth fund (SWF) to be eligible for full income tax exemptions on gains from long-term investments in specified priority infrastructure sectors in the country.

The Finance Act, 2020, provided for income tax exemption on income from interest, dividend and long-term capital gains for specified infrastructure investments. “This 100% income tax exemption facility was well received by SWFs and pension funds across the globe, and a large number of SWFs and pension funds have shown interest in investing in India’s infrastructure sector,” a finance ministry official said.

The government’s NIIF Master Fund has raised funds from a clutch of investors, including the Abu Dhabi Investment Authority (ADIA), Temasek of Singapore, the Canada Pension Plan Investment Board (CPPIB) and AustralianSuper. ADIA alone has committed $1 billion, while CPPIB has pledged $600 million and Temasek $400 million.

The Central Board of Direct Taxes issued detailed guidelines in July to facilitate the notification process. Notified foreign pension funds were also granted similar exemption subject to fulfilment of certain prescribed conditions, the government said.

Officials said the notification process was finalised in record time despite limitations due to the pandemic. MIC Redwood 1 RSC applied for the tax-free status in September, which was followed by deliberations and meetings between the applicant and tax authorities through video conferencing and emails, the official said.

MIC Redwood 1 RSC submitted its final replies on October 20, followed by consultation and legal vetting by the law ministry. The notification was finally issued on Monday.