The government grants tax relief to the Canadian pension fund

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

The tax exemption is subject to endorsements. The entity must file an income tax return from the time of its investment until its liquidation, as prescribed by the Income Tax Act. It must also declare to the tax authorities the quarterly investments made in India.

The tax relief is aimed at attracting foreign investors to India’s infrastructure sector. CPPIB Credit Investments VI Inc. is one of many pension funds that have already received this benefit.

This tax incentive was introduced into the Income Tax Act through the Finance Act 2020 and has been in effect since April 1, 2021. The relief is granted under Section 10 of the Act income tax which deals with income not to be included in taxable income. .

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

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

The government pipeline of around 7,000 identified infrastructure projects has a total cost of around 111 trillion. The risks associated with long-gestating infrastructure projects mean that normal bank loans are not sufficient to finance these projects. Pension funds and sovereign wealth funds are helping to fill this gap in project financing.

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Dolores W. Simon