Notification of Sovereign Wealth Fund under section 10(23FE) of the Income-tax Act, 1961: CBDT vide Circular No. 15/2020 dated 22.07.2020 issued Order u/s 119 to provide for filing of an application in Form No. I for getting notified under section 10(23FE) by a Sovereign Wealth Fund (SWF). The Circular further requires to report its infrastructure investments in India on a quarterly basis.
Readers are aware that the Finance Act, 2020 inserted a new clause (23FE) in section 10 of the Income-tax Act, 1961 to provide for exemption to the income of a ‘specified person’ in the nature of dividend, interest or long-term capital gains arising from the investment made by it in India if the investment is made in specified infrastructure business (including business notified vide Notification No 44/2020 dated 06.07.2020, i.e., Infrastructure sub-sectors mentioned in Harmonised Master List updated as on 13.08.2018) during the period from 01.04.2020 to 31.03.2024, and held for at least three years.
‘Specified person’ for this purpose has been defined to mean-
(a) wholly-owned subsidiaries of Abu Dhabi Investment Authority (ADIA),
(b) notified Sovereign Wealth Fund (SWF) and
(c) notified Pension Funds (PF).
During the Budget 2020 speech, the Finance Minister announced that in order to incentivize the investment by the Sovereign Wealth Fund of foreign governments in the priority sectors, it is proposed 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 3 years.
The Circular further states that the Form I shall be filed with the Member (Legislation), Central Board of Direct Taxes (CBDT), Department of Revenue, Ministry of Finance, North Block, New Delhi if the application is filed during the financial year 2020-21.
Thereafter, for subsequent financial years, Form I shall be filed to the Member, CBDT having supervision and control over the work of Foreign Tax and Tax Research (FT&TR) Division.
The Order further requires the notified SWF to file a return of income along with audit report.
Such SWFs are also required to file a quarterly statement within one month from the end of the quarter electronically in Form II in respect of each investment made during the quarter in accordance with the prescribed procedure. The quarterly statements shall be required to be verified by the person competent to verify the return of income under section 140 of the Income-tax Act, 1961.
The following compliances have been ordered under the Circular No. 15/2020 for getting notified u/s 10(23FE) for availing the exemption from the interest, dividend and long-term capital gains by an SWF-
The Form I and Form II are annexed to the Circular.
Read the full text of the CBDT’s Circular No. 15/2020 dated 22.07.2020 on SWF u/s 10(23FE)
Circular No. 15 of 2020
F No 370142/26/2020-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(Tax Policy & Legislation Division)
******
New Delhi, 22nd July, 2020
Notification of Sovereign Wealth Fund under section 10(23FE) of the Income-tax Act, 1961
The Finance Act, 2020, inter alia, inserted clause (23FE) in section 10 the Income-tax Act, 1961 (the Act) to provide for exemption to income of a specified person in the nature of dividend, interest or long-term capital gains arising from investment made by it in India if the investment is made in specified infrastructure business (including business notified vide Notification No 44/2020 dated 06.07.2020, i.e., Infrastructure sub-sectors mentioned in Harmonised Master List updated as on 13.08.2018) during the period from 01.04.2020 to 31.03.2024, and held for at least three years.
2. Specified person for this purpose has been defined to mean wholly owned subsidiaries of Abu Dhabi Investment Authority (ADIA), notified Sovereign Wealth Fund (SWF) and notified Pension Funds (PF), which fulfil conditions specified in the clause or to be prescribed for the PF.
3. In order to facilitate the process of notification of the SWF, the Board, in exercise of powers conferred under section 119 of the Act, hereby specifies that the SWF shall file application in the Form I in the Annexure to this circular. The Form I shall be filed with the Member (Legislation), Central Board of Direct Taxes (CBDT), Department of Revenue, Ministry of Finance, North Block, New Delhi during the financial year 2020-21 and thereafter to the Member, CBDT having supervision and control over the work of Foreign Tax and Tax Research Division.
4. Further, the SWF shall be required to file return of income along with audit report. It shall also be required to file a quarterly statement within one month from the end of the quarter electronically in Form II in respect of each investment made during the quarter in the Annexure to this circular. The Principal Director General of Income Tax/Director General of Income Tax (Systems) shall lay down the necessary procedure for furnishing and verification of the Form II.
Enclosure: ANNEXURE.
(Niraj Kumar)
Deputy Secretary (TPL )-1
Download Copy of CBDT Circular No. 15/2020 dated 22.07.2020 on SWF u/s 10(23FE) in pdf format.
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