The Indian government Thursday proposed to extend certain tax benefits to sovereign wealth funds (SWFs) and pension funds investing in the country by one year.
Presenting the interim budget for 2024-25, Finance Minister Nirmala Sitharaman said certain tax benefits on investments made by SWFs and pension funds are expiring on March 31, 2024 and that the government proposes to extend these benefits to March 31, 2025.
The decision was being taken "to provide continuity in taxation", she said in her budget speech.
The Indian government had, in the budget for 2020-21, provided tax sops to SWFs and pension funds investing in the infrastructure sector. These sops included full exemption on interest, dividend and capital gains on investments made in the infrastructure sector before March 31, 2024.
This move was aimed at supporting SWFs such as Singapore’s GIC, Abu Dhabi Investment Authority and Canadian pension funds such as CPPIB and CDPQ, all of whom are major investors in India’s infrastructure sector.
"The extension of tax benefits for sovereign wealth funds... is a good signal from the government to indicate that there will be continuation of beneficial and institutional investor friendly policies," said Mayuresh Raut, co-founder and managing partner at Seafund.
The finance minister also announced extension by a year of a scheme under which certain registered startups get a complete tax exemption on profit for three years in a block of total ten years, given that the annual turnover doesn’t exceed Rs 25 crore in a fiscal.
The scheme was earlier available to startups incorporated till March 31, 2024. This sunset clause has now been extended by a year.
However, the startup ecosystem noticed the absence of “concrete” measures for them or their, founders and investors, said Yagnesh Sanjharka, founder and CFO of early-stage investor 100X.VC,
The emphasis on macro measures is appreciated, as it indirectly benefits startups in these sectors but it was a missed opportunity to outline specific initiatives and incentives to foster startup growth, Sanjharka added.
To promote research in the technology ecosystem, the government also announced a corpus of Rs 1 lakh crore with a long-tenure of interest-free loans for research in sunrise sectors.
"A corpus of rupees one lakh crore will be established with fifty-year interest free loan. The corpus will provide long-term financing or refinancing with long tenors and low or nil interest rates. This will encourage the private sector to scale up research and innovation significantly in sunrise domains. We need to have programmes that combine the powers of our youth and technology," the finance minister said.
