Notification of Sovereign Wealth Funds under the Income-tax
Procedure for Notification of Sovereign Wealth Funds under the Income-tax Act, 2025
Schedule V (Table – Sl. No. 7) of the Income-tax Act, 2025 provides tax exemption to certain specified persons in respect of income earned from investments in India. The exemption covers income in the form of dividends, interest, amounts referred to in section 92(2)(k), or long-term capital gains (including cases where such gains are treated as short-term under section 76 of the Act).
This benefit is available where the investment is made in a specified infrastructure business, including infrastructure sub-sectors notified through relevant government notifications such as those included in the Harmonised Master List of Infrastructure. The investment must be made during the period 1 April 2020 to 31 March 2030 and should be held for a minimum period of three years.
Eligible Specified Persons
For the purpose of this exemption, the term “specified person” includes, among others, a Sovereign Wealth Fund (SWF) that has been officially notified and satisfies the conditions laid down in Schedule V [Table – Sl. No. 7, Note 5(a)] of the Act.
Application Process for Notification
To streamline the process for notifying Sovereign Wealth Funds, the Central Board of Direct Taxes (CBDT), exercising powers under section 239 of the Income-tax Act, 2025, has prescribed the procedure for submitting applications.
An SWF seeking notification must submit an application in Form I, as provided in the annexure to the circular. The application should be filed with the Member, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, New Delhi, who oversees matters related to the Foreign Tax and Tax Research Division.
Compliance Requirements after Notification
A notified Sovereign Wealth Fund must comply with the following reporting obligations:
- File its income tax return along with the required audit report.
- Submit a quarterly statement in Form II, detailing each investment made during the quarter.
- The quarterly statement must be filed electronically within one month from the end of the relevant quarter.
Applicability of Forms
1. Sovereign Wealth Funds Already Notified under the Income-tax Act, 1961
SWFs that have already been notified under section 10(23FE) of the Income-tax Act, 1961 are not required to submit a fresh application in Form I. However, they must comply with the requirement of filing the quarterly statement in Form II for investments made during each quarter.
2. Sovereign Wealth Funds Seeking Fresh Notification
SWFs seeking recognition under Schedule V [Table – Sl. No. 7, Note 5(a)(ii)(G)] of the Income-tax Act, 2025 must submit an application in Form I as described above. Once notified, they will also be required to submit quarterly statements in Form II for each investment made.
Technical Framework for Filing
The Director General of Income-tax (Systems) will prescribe the data structure, filing standards, and procedures for submission and verification of Form I and Form II. The Directorate will also implement appropriate security measures, data storage policies, and retrieval mechanisms for the information submitted through these forms.
Effective Date: The provisions outlined in this circular will come into effect from 1 April 2026 and will apply for the tax year 2026–27 and subsequent years.
Also Read: FAQs and Guidance notes on Forms under Income-tax Rules, 2026
Read More: Union Budget 2026 – CA Cult
