India Considers Tax Breaks for Saudi Wealth Fund

India Considers Tax Breaks for Saudi Wealth Fund

Why in the News ?

The Indian government is exploring tax exemptions and incentives for Saudi Arabia’s sovereign wealth fund (PIF) to boost its proposed $100 billion investments in India’s infrastructure and energy sectors.

Proposals Under Consideration for PIF:

• Tax Holiday: The Indian government is considering offering a tax holiday of up to 10 years for Saudi Arabia’s Public Investment Fund (PIF).
• Streamlining Tax Exemptions: Efforts are being made to simplify procedures for PIF to claim tax exemptions on dividends, interest, and long-term capital gains (LTCG) related to investments in infrastructure assets.
• Treatment Similar to ADIA: The proposed exemptions may mirror the benefits granted to the Abu Dhabi Investment Authority (ADIA), which receives specific tax benefits under the Income Tax Act.

Investment Plans and Areas of Focus

• Sectoral Interests: PIF plans to invest in various sectors in India, including energy, petrochemicals, infrastructure, technology, digital infrastructure, telecommunications, pharmaceuticals, manufacturing, and healthcare.
• Focus on Infrastructure: Saudi Arabia is particularly interested in investing in India’s infrastructure assets, including refineries and energy projects.
• Task Force for Investment Promotion: A High-Level Task Force was set up in 2024 to facilitate and enhance investment flows between India and Saudi Arabia.

Taxation and Legal Framework

• Section 10 (23FE): PIF may receive tax exemptions under this section, which provides benefits to sovereign wealth funds (SWFs) and global pension funds making infrastructure investments in India.
• Specific Exemptions for PIF: Discussions are ongoing to include PIF under Section 10 (23FE), reducing procedural complexities for claiming tax exemptions.