The sovereign wealth fund exemption in India keeps dividend, interest and long-term capital gains out of total income where a notified sovereign wealth fund, a notified pension fund, a UAE-resident wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA) or Saudi Arabia’s Public Investment Fund (PIF) invests in Indian infrastructure on or before 31 March 2030 and holds the investment for at least three years (Schedule V, Table Sl. No. 7, Income-tax Act 2025). Only sovereign wealth funds and pension funds need a CBDT notification. ADIA’s UAE-resident wholly owned subsidiary, PIF and PIF’s Saudi-resident wholly owned subsidiaries are named in the statute and need none, though each must meet its own conditions in Note 5(a). A notified fund committing capital before that date has to check two cut-offs: the statute’s, and the one in its own notification. The exclusion then lasts only while the hold, the investee’s threshold, the borrowing bar and the filings are met.

Table of Contents

Where the sovereign wealth fund exemption sits after 1 April 2026

For tax years from 1 April 2026, the exemption is Schedule V to the Income-tax Act 2025, Table Sl. No. 7, with definitions in Note 5. It replaces section 10(23FE) of the Income-tax Act 1961, repealed by s.536(1). Notifications and circulars issued under the 1961 Act continue “so far as it is not inconsistent with the corresponding provisions of this Act” (s.536(2)(j)), so the fund notifications and CBDT’s guidance should carry over. An amount excluded before 1 April 2026 is “deemed to be the income of the tax year in which the violation takes place” if a condition is breached later (s.536(2)(h)). We found no amendment to Schedule V in the Finance Act 2026.

Column B covers dividend, interest, “any sum referred to in section 92(2)(k)” and “long-term capital gains (whether or not such capital gains are deemed as short-term capital gains under section 76)”, from an investment “whether in the form of debt or share capital or unit”. It is a domestic exclusion. On the text, the residence certificate in s.159(8) is a condition of relief “under an agreement”, not of Schedule V.

Who is a specified person

Note 5(a)	Who	Conditions in the text
(i)	A wholly owned subsidiary of ADIA	UAE resident; “makes investment, directly or indirectly, out of the fund owned by the Government of Abu Dhabi”. No notification
(ii)	A sovereign wealth fund	Wholly owned and controlled, directly or indirectly, by a foreign government; regulated under its law; earnings to that government; assets vest in it on dissolution; no part in the investee’s day-to-day operations (appointing directors does not count); notified, and meets the notification’s conditions
(iii)	A pension fund	Created under foreign law (including a province, State or local body); not taxed there, or exempt on all income; passive as in (ii); notified; meets prescribed conditions (r.282, Income-tax Rules 2026)
(iv), (v)	PIF, and its wholly owned subsidiaries	Subsidiary resident in Saudi Arabia and investing out of the fund owned by the Saudi Government. No notification

A holding vehicle lower in the chain claims only if it is itself within a limb. A fund holding through an ordinary Mauritius company relies on that company’s treaty instead; see Mauritius holding company options after the 2026 Protocol.

PIF and its Saudi-resident wholly owned subsidiaries are now named in the statute itself (Note 5(a)(iv)–(v)), so the text sets no notification condition for them. PIF’s earlier notification (No. 125/2022, S.O. 5345(E), 16 November 2022) had its end date moved from 31 March 2025 to 31 March 2030 by Notification No. 106/2025 (S.O. 3160(E), 11 July 2025).

The five eligible investees and their thresholds

Investee (col D(a)(iii))	Definition (Note 5)	Threshold	Exempt income
Eligible InvIT	InvIT referred to in s.2(21)(a)	None	Full
Eligible infrastructure entity	Develops, operates or maintains an “infrastructure facility as defined in section 138”, or a notified business	None	Full
Eligible AIF	Category I or II AIF under the SEBI (AIF) Regulations 2012	“not less than 50%” in eligible infrastructure entities, domestic companies, NBFCs or InvITs	Proportionate (col D(e))
Eligible domestic company	Set up and registered on or after 1 April 2021	Minimum 75% in eligible infrastructure entities	Proportionate (col D(f))
Eligible NBFC	Infrastructure Finance Company or Infrastructure Debt Fund	Minimum 90% lending to eligible infrastructure entities	Proportionate (col D(g))

Rule 283 of the 2026 Rules does the arithmetic:

Cumulative test. The percentage aggregates eligible investments on the audited balance sheets at the end of every year from 2021-22 to the year before the relevant tax year (r.283(2)–(4)).
Three months’ grace. Money deployed within three months of receipt counts as deployed (r.283(2)(c), (3)(c)).
Deployment window. Only AIF investment, company investment or NBFC lending made by 31 March 2030 is “eligible” (r.283(12)(c)–(d)).
After 2030. From tax year 2031-32, a threshold met for 2030-31 is deemed met (r.283(5)).
Notification date. Exempt income counts only income from investment made “on or after the date of notification of the specified person” (r.283(6)(b), (7), (8)).
Secondary purchases. CBDT’s guidance (Circular 9 of 2022) treats a purchase of existing shares or units, after the fund’s notification date and within the window, as an investment.

The three-year hold and the clawback

The investment must be “held for at least three years” (col D(a)(ii)). In the statute, that condition attaches to the investment made by the specified person itself. Only the investment date must fall by 31 March 2030; the hold can end later. If a condition later fails, “such income shall be chargeable to income-tax as the income of the specified person of that tax year” (col D(d)).

CBDT’s guidance (Circular 9 of 2022), which Circular 11 of 2025 updates by reading its 2024 dates as 31 March 2030 (para 3), adds:

the three-year rule applies at each layer, including an AIF’s, company’s or NBFC’s onward investment of the fund’s money (this extension, and the consequence of an early exit at an intermediary level, comes from the guidance (para 4.1), not from the wording of col D(a)(ii));
on an early transfer, the gain is not exempt, and interest or dividend exempted earlier is taxed in the year of transfer;
if an investee falls below its threshold, earlier years stay exempt and the exemption stops from that year;
breaches of a notification’s audit and segmented-account conditions operate only from the year of breach; other breaches bring all earlier excluded income to tax in the year of breach.

The borrowing bar

Column D(h): “in case a sovereign wealth fund or pension fund has loans or borrowings, directly or indirectly, for the purposes of making investment in India, such fund shall be deemed to be not eligible for exclusion from total income.”

The definition is wide (Note 5(c)). For a sovereign fund it includes “any deposit or investment made in a sovereign wealth fund by, any person other than the Government of the country in which the sovereign wealth fund is set up”, so co-investors’ money in the fund counts. For a pension fund it excludes “statutory obligations and defined contributions” of retirement and similar plans.

The bar turns on purpose. CBDT’s guidance (Circular 19 of 2021) disqualifies a fund where it or a group concern borrows specifically to invest in India; otherwise there is no presumption, provided the Indian investment is not sourced from the borrowing (para 5). The analysis is therefore made for the fund that invests and the money used for its Indian investment. Financing elsewhere in the group, not taken for that investment, does not of itself disqualify the fund. Column D(h) names only “a sovereign wealth fund or pension fund”; whether it reaches the ADIA and PIF limbs is not settled by the text.

Two dates: the statute’s and the notification’s

The statute. The window runs from 1 April 2020 to 31 March 2030 (col D(a)(i)). The Finance Act 2025 replaced “2025” with “2030” in the 1961 clause (s.6(g)(ii)), effective 1 April 2025 (Circular 11 of 2025, para 2).

The notification. Each sovereign or pension fund notification sets its own window: “the eligible investment made by it in India on or after the date of publication of this notification in the Official Gazette but on or before the 31st day of March, 2024” (Notification No. 66/2021, S.O. 1856(E), 13 May 2021, a pension fund). Amendments of 18 July 2024 moved that date to 31 March 2025 (for PIF’s notification, S.O. 2862(E), recorded in the Gazette text of Notification No. 106/2025). On 11 July 2025 CBDT amended notifications individually, substituting “31st day of March, 2030” for “31st day of March, 2025”; Notification No. 111/2025 (S.O. 3165(E)) is one.

Three checks follow:

Start date. Money invested before the notification was published is outside it.
End date. The statute’s 2030 date does not itself rewrite a notification. Each fund should hold the amended text of its own notification.
The gap. Each July 2025 amendment applies “except as respects things done or omitted to be done on and from the 1st April, 2025 till the date of publication”. How that treats an investment made between 1 April and 11 July 2025 is a question of interpretation.

ADIA: Schedule V or the UAE treaty

Schedule V’s ADIA limb covers a UAE-resident wholly owned subsidiary, not ADIA itself (Note 5(a)(i)). ADIA itself falls under the India–UAE tax treaty: under Article 24(1) “the Government of one Contracting State shall be exempt from tax, including capital gains tax, in the other Contracting State”, “Government” includes ADIA (Art 24(2)(b)(ii)), and ADIA is recognised as a UAE resident (Art 4(2)(d)). The wider treaty is in the India–UAE tax treaty guide.

	Schedule V, Note 5(a)(i)	India–UAE DTAA, Art 24
Who	ADIA’s UAE-resident wholly owned subsidiary	“Government”, including ADIA
Income	Dividend, interest, s.92(2)(k) sums, long-term gains	“any income derived by such Government from that other Contracting State”
Investee	Five eligible types	No restriction in the text
Window and hold	To 31 March 2030; three years	None in the text
Paperwork	Schedule V conditions	Residence certificate and Form 41 (s.159(8); r.75)
Anti-abuse	GAAR	GAAR (s.159(6)) and Article 29

Whether Article 24 reaches ADIA’s subsidiaries is open. Article 24(2)(b)(iii) adds bodies “as may be agreed from time to time”, and we found no published agreement covering them. Treaty rates and anti-abuse rules across India’s other treaties are compared in the India DTAA rates comparison.

Procedure under the Income-tax Rules 2026

Rules 282–283 and Forms 174–177 (G.S.R. 198(E), 20 March 2026) now do the work of rules 2DB and 2DCA and Forms 10BBB and 10BBC of the 1962 Rules.

Pension funds (r.282). Up to 10% of assets may serve other purposes if wholly government-owned and vesting in that government on dissolution (r.282(1)(c)). The fund applies in Form No. 174 to the CBDT Member supervising the Foreign Tax and Tax Research Division (r.282(2)), reports each Indian investment in Form No. 175 within one month after the quarter, and files its return by the s.263(1)(c) due date with an accountant’s certificate in Form No. 176 (r.282(1)(g)–(h)). Form 176 refers to funds notified under the 1961 Act.
Investees (r.283(9)–(11)). Every eligible AIF, domestic company and NBFC that receives a specified person’s money files Form No. 177 for each tax year while it stays invested.
Sovereign funds. The 2026 Rules prescribe no application form for sovereign funds; we found no post-April 2026 circular on the point. Earlier notifications required quarterly statements in Form II under Circular 15 of 2020 (e.g. Notification No. 33/2021, condition (iii)).

A decision summary for finance teams is in sovereign and pension fund tax exemption: investing before 2030.

GAAR

Chapter XI applies “Irrespective of anything contained in this Act” (s.178(1)), and to treaty claims “even if such provisions are not beneficial” (s.159(6)). Rule 128 excludes arrangements whose tax benefit in the year does not exceed INR 3 crore (r.128(1)(a)) and income from transferring investments made before 1 April 2017 (r.128(1)(d), substituted by Notification No. 55/2026). The second cannot help: every investment in the window dates from 1 April 2020 or later.

Worked example: a pension fund through a Category I AIF

A pension fund’s notification, as amended, runs to 31 March 2030. On 1 September 2027 it subscribes INR 400 crore to a SEBI-registered Category I AIF. The AIF’s eligible investments, aggregated under r.283(2), are 60% in eligible infrastructure entities and InvIT units and 40% in other companies. Figures are illustrative.

Eligibility. 60% clears the 50% floor (Note 5(e)(ii)).
Exempt amount. In tax year 2028-29, INR 30 crore of AIF income is attributable to the fund: INR 21 crore from infrastructure entities and InvIT units bought with its money after its notification date, INR 9 crore from other companies. INR 21 crore is exempt (items I and L, r.283(6)(b)). The 60% decides eligibility; it does not set the exempt amount. The INR 9 crore is taxed as if the fund had invested directly (r.283(6)(a)).
Hold. The units must be held until at least 1 September 2030. A redemption in March 2030 brings the excluded income to tax in that year (col D(d)), as, under CBDT’s guidance, would an early sale by the AIF of an infrastructure holding bought with the fund’s money.
Ratio drop. If the AIF falls to 45% in 2029-30, the guidance keeps earlier years exempt but ends the exemption from that year.
Filings. Form 175 for the September 2027 quarter is due by 31 October 2027. The AIF files Form 177 every year until the money is returned.

Had the notification not been amended beyond 31 March 2025, the 2027 investment would fall outside it, though inside the statutory window.

Open questions as of 29 October 2026

These are unresolved interpretative or administrative questions. We do not answer them definitively, and each should be verified case by case before investment.

How a new sovereign fund applies under the 2026 Rules, and whether the Circular 15 of 2020 procedure survives under s.536(2)(j).
How the July 2025 saving clause treats investments made between 1 April and 11 July 2025.
Whether a commitment signed by 31 March 2030 but drawn down later is an investment “made” by that date.
Whether col D(h) reaches the ADIA and PIF limbs, and whether Article 24 reaches ADIA’s subsidiaries.
Whether an IFSCA-regulated fund can qualify: Note 5(e)(i) refers to SEBI’s AIF Regulations, and we found no sovereign or pension fund entry in Schedule VI. See GIFT City tax benefits for funds.

We found no reported court or Tribunal ruling on the exemption.

Common questions

Must income arise before 31 March 2030 to be exempt? No. The date tests when the investment is made (col D(a)(i)). Income can arise later if the conditions are met.

Does ADIA need a CBDT notification? Not under Schedule V, whose ADIA limb covers UAE-resident wholly owned subsidiaries without notification. ADIA itself relies on Article 24 of the India–UAE treaty.

Can a pension fund invest through an AIF only partly in infrastructure? Yes, if the AIF has at least 50% in eligible investments (Note 5(e)(ii)). Only income traced to those investments is exempt (r.283(6)).

Did the Finance Act 2026 change the sovereign wealth fund exemption? We found no amendment to Schedule V in it. The 2030 date came from the Finance Act 2025.

Sources

Income-tax Act 2025 (30 of 2025), Schedule V, Table Sl. No. 7 and Note 5. Income Tax Department. incometaxindia.gov.in
Income-tax Act 2025, s.536 (repeal and savings). Income Tax Department. incometaxindia.gov.in
Income-tax Act 2025, s.159. Income Tax Department. incometaxindia.gov.in
Income-tax Act 2025, s.178. Income Tax Department. incometaxindia.gov.in
Income-tax Rules 2026, G.S.R. 198(E), 20 March 2026 (rr.75, 128, 282, 283; Forms 174–177). CBDT. incometaxindia.gov.in
CBDT Notification No. 55/2026, G.S.R. 241(E), 31 March 2026 (r.128). CBDT. incometaxindia.gov.in
Finance Act 2025 (No. 7 of 2025), s.6(g). Gazette of India, Extraordinary. Official URL not confirmed
CBDT Circular No. 11 of 2025, F.No.370142/32/2025-TPL, 2 September 2025. CBDT. incometaxindia.gov.in
CBDT Circular No. 9 of 2022, F.No.370142/2/2022-TPL, 9 May 2022, paras 4.1, 4.3, 4.4, 4.6. CBDT. Official URL not confirmed; reproduction read
CBDT Circular No. 19 of 2021, F. No. 370142/48/2021-TPL, 26 October 2021, para 5. CBDT. Official URL not confirmed; reproduction read
CBDT Circular No. 15 of 2020, F No 370142/26/2020-TPL, 22 July 2020. CBDT. Official URL not confirmed; reproduction read
CBDT Notification No. 66/2021, S.O. 1856(E), 13 May 2021 (pension fund). CBDT. incometaxindia.gov.in
CBDT Notification No. 33/2021, S.O. 1661(E), 19 April 2021 (sovereign wealth fund). CBDT. incometaxindia.gov.in
CBDT Notification No. 106/2025, S.O. 3160(E), 11 July 2025 (amending Notification No. 125/2022, PIF). Gazette of India, Extraordinary. egazette.gov.in
CBDT Notification No. 111/2025, S.O. 3165(E), 11 July 2025 (amending Notification No. 95/2023). CBDT. incometaxindia.gov.in
Agreement between India and the UAE for the avoidance of double taxation, Arts 4(2), 24, 29, as amended by S.O. 2001(E), 28 November 2007. Income Tax Department. incometaxindia.gov.in
Income-tax Act 2025, Schedule VI. Income Tax Department. incometaxindia.gov.in

Sovereign Wealth Fund Exemption in India: The 2030 Cut-off