Qatar Holding LLC obtains tax relief for infrastructure investments

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New Delhi: The Central Board of Direct Taxes (CBDT) has granted income tax exemption to income that Qatar Holding LLC., a sovereign wealth fund, will derive from its infrastructure investments in India, an official order showed.

The tax incentive is applicable to investments made between Friday and March 31, 2024 under a provision of the Income Tax Act designed to attract investment in the infrastructure sector. The benefit, however, is subject to endorsements.

The conditions include the filing of tax returns by the investor, the verification of its books of accounts and the production of quarterly reports on the investments made.

“The assessee will continue to be owned and controlled, directly or indirectly, by the Government of Qatar, and at no time should any other person have any ownership or control, directly or indirectly, over the assessee,” said CBDT. The income tax benefit introduced by the finance law for 2020 has been in force since April 1, 2021. The allowance is granted under article 10 of the income tax law which deals 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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