Abu Dhabi's SWF becomes first notified fund to get 100% I-T exemption

New Delhi, Nov 3: Abu Dhabi's Sovereign Wealth Fund (SWF) -- MIC Redwood 1 RSC Limited -- became the first foreign SWF to be notified and granted 100 per cent income tax exemption for long term investments to be made in specified priority sectors, the Union Finance Ministry said in a statement on Tuesday.

The MIC Redwood 1 RSC Limited of Abu Dhabi has been provided 100 per cent income-tax (I-T) exemption to income from interest, dividend and long-term capital gains for its investment in India's priority sector as per the Finance Act, 2020.

With the notification from Central Board of Direct Taxes (CBDT), MIC Redwood 1 RSC Limited of Abu Dhabi became the first notified SWF which will be availing this exemption.

"This 100 per cent income-tax exemption facility was well received by the SWFs and Pension Funds across the globe and a large number of SWFs and Pension Funds have shown interest in making an investment in India's infrastructure sector," the statement read.

CBDT had issued detailed guidelines to facilitate the process of SWF's notification.

Notified foreign pension funds were also granted similar exemption subject to fulfilment of certain prescribed conditions.

Speaking under conditions of anonymity, a senior level official said that to expedite foreign investment in India's priority areas during the Covid pandemic time, the process of notification of the MIC Redwood 1 RSC Limited was completed in a record time.

"On September 18, 2020, the MIC Redwood 1 RSC Limited made an application for seeking tax-exemption notification as per the CBDT guidelines. Amidst the challenges of Covid-19, all deliberations and meetings between applicant and tax authorities were held virtually through video conferencing and communications were made only through emails. The MIC Redwood 1 RSC Limited submitted its final replies on October 20, 2020 and after that the process of notification including consultation with Ministry of Law and Justice for legal vetting of the notification, etc. has been completed in less than two weeks," he said.

The official further added that with the completion of all legal and other formalities the notification granting 100 per cent tax-exemption was issued on November 2, 2020.

The Government of India in order to incentivise long-term investment by the SWFs of the foreign governments in the priority sectors, had granted through the Finance Act, 2020, a 100 per cent income-tax exemption to income of a notified SWF in respect of its investment made in the specified infrastructure sectors.

The Government of India had issued a notification on July 6, 2020 to broaden the scope of this exemption and made all sub-sectors of Harmonised Master List of the infrastructure eligible for this income-tax exemption.