Incentives to boost public sector monetisation

I TAX RELIEF FOR SOVEREIGN FUNDS

Tax exemption for sovereign wealth funds and benefits for investment in infrastructure investment trusts (Invits) are expected to help public sector entities in their asset monetisation drive. Experts see the Budget announcement positive for investments in both Invits and the toll-operate-transfer mode (TOT).

To incentivise investments from sovereign wealth funds in priority sectors, Finance Minister Nirmala Sitharaman said, a 100 per cent tax exemption to their interest, dividend and capital gains income in respect of investment would be allowed. These are to be made in infrastructure and

other 36 notified sectors before March 31, 2024, and with a minimum lock-in period of three years.

“The incentives to sovereign funds will help India with its monetisation drive,” said Ratnam Raju, associate director (group head of Infrastructure

and Project Finance) at CARE Ratings. The Abu Dhabi Investment Authority and Singapore’s GIC are some sovereign funds with investments in India. According to the Finance Bill, these incentives will apply to sovereign funds, wholly owned and controlled, directly or indirectly, by the government of a foreign country. Experts said the definition to allow for direct and indirect control made it a wide ambit for most funds to qualify.

“Incentives given to sovereign funds and the tax benefit extended to unlisted Invits will help the government attract more foreign investment and investor interest in general to Invits. This should largely help and is in line with plans of INVIT by the NHAI and other state-run entities,” said Shubham Jain, senior vice- president and group head of corporate ratings for ICRA.

Others also expect the removal of dividend distribution tax (DDT) will help government authorities attract higher interest in roads offered under the TOT model.