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New Delhi: The Central Board of Direct Taxes (CBDT) on Friday notified CPPIB Credit Investments VI Inc., a pension fund governed by the laws of Canada, as an eligible entity for income tax relief for investments made in India by end of March 2024, showed an official order.

The tax break is subject to riders. The entity has to file tax return from the time of its investment till it is liquidated as prescribed under Income Tax Act. It also has to report quarterly investments made in India to the tax department.

The tax relief seeks to attract foreign investors into India’s infrastructure sector. CPPIB Credit Investments VI Inc. is one of the several pension funds that have already received this benefit.

This tax incentive was introduced in the Income Tax Act by way of Finance Act 2020 and is in effect from 1 April, 2021. The relief is given under section 10 of the Income Tax Act which deals with earnings not to be included in the taxable income.

It covers income of the notified person in the nature of dividend, interest or long-term capital gains arising from an investment in India, whether in the form of debt or share capital.

The rising number of investors opting for this tax break indicates the growing appetite among sovereign wealth funds and pension funds for India’s infrastructure sector at a time the government is betting on its multiplier effect to support economic growth.

The government’s pipeline of about 7,000 identified infrastructure projects have a total cost of about 111 trillion. The risks involved in long gestation infrastructure projects mean normal bank lending is not enough to finance these projects. Pension funds and sovereign wealth funds help to fill this gap in financing projects. 

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