CBDT Extends Sovereign Wealth Funds Tax Exemption Under Section 10(23FE) to March 31, 2030

(INDIA) — Foreign sovereign investors and pension funds seeking India’s tax break under Section 10(23FE) now have until March 31, 2030, to make eligible investments, after the CBDT extended the exemption window by six years.

The change came through the Income-tax (Twenty-Fifth Amendment) Rules, 2025, notified as G.S.R. 598(E) dated September 1, 2025. The amendment updates Rule 2DCA of the Income-tax Rules, 1962.

For affected funds, this is a deadline story first. To claim the exemption, qualifying investments must be made on or before March 31, 2030. Miss that date, and the tax exemption under Section 10(23FE) will generally not apply unless the law is extended again.

This article is current as of March 31, 2026.

Deadline snapshot for Section 10(23FE)

📅 Deadline Alert: The current exemption window runs through March 31, 2030. Funds should not wait for a last-quarter filing rush.

What the exemption covers

Section 10(23FE) gives a 100% tax exemption on certain income earned by eligible Sovereign wealth funds and pension funds.

The exemption applies to:

• Dividends
• Interest
• Long-term capital gains

The income must arise from investments in India’s specified infrastructure businesses and other notified priority sectors.

The rule is aimed at long-term foreign capital. Market participants include funds linked to Saudi Arabia, Singapore, Kuwait, Norway, and the UAE. Public data showed about 35 funds had been notified as of 2024.

Why this deadline matters

The scheme began on April 1, 2020. It first allowed eligible investments through March 31, 2024. Later changes moved that date to March 31, 2027. The latest amendment now extends the window to March 31, 2030.

That gives investors more time, but it does not remove compliance duties. A late investment can still fall outside the exemption, even if the fund itself is otherwise eligible.

⚠️ Warning: The extension does not mean automatic approval. A fund must still be notified as a specified person and meet ongoing conditions.

Who can qualify under Section 10(23FE)

For sovereign wealth funds, the main conditions include:

• The fund is wholly owned or controlled by a foreign government
• Its assets come from sovereign resources
• It is not liable to tax in its home country
• It invests in notified projects or sectors

For pension funds, the broad conditions include:

• The fund is created under foreign law
• It is not liable to tax abroad
• It is specified by Central Government notification

The first well-known eligible entity was the Abu Dhabi Investment Authority, notified in November 2020.

Application and ongoing compliance

Funds do not get the benefit by default.

The process generally works in three steps:

1. Apply to the CBDT or Department of Revenue for notification as a specified person under Section 10(23FE).
2. After approval, file quarterly statements, an annual income tax return, and an audit report confirming compliance.
3. Keep records that support government ownership, tax-exempt status abroad, and qualifying Indian investments.

Notification No. 69/2022 set out the audit report format and related compliance requirements.

Some approvals have moved quickly. The Abu Dhabi case was reportedly completed in about two months. Still, processing speed can vary.

Is there any extension option after March 31, 2030?

As of March 31, 2026, there is no individual extension process that lets a fund file late and still preserve the investment deadline. Any further relief would likely require another policy or legislative change.

No specific disaster relief or emergency extension affecting this deadline has been announced so far.

Recent policy signals

The extension followed the Union Budget 2025 and a July 2025 Department of Revenue notification. Policymakers are also considering a wider exemption for listed equity market investments, with a minimum three-year holding period.

That proposal was still under consideration as of January 5, 2026. No final notification had been issued by that date.

If approved later, the change could support fresh flows into InvITs, REITs, and mutual funds that retail investors can access. Current estimates suggest the framework could support about $3.8 billion to $6.7 billion in annual inflows.

What U.S.-linked investors and immigrants should watch

If you are a U.S. person with ties to a foreign pension arrangement or investment vehicle, this Indian exemption does not remove U.S. filing duties. Review international taxpayers guidance and Publication 519 if your residency status changed.

For tax year 2026, filed in 2027, U.S. residents may still need to report foreign income, foreign accounts, or ownership interests. Relevant forms can include FBAR, Form 8938, and other international information returns. Check the latest forms and publications page before filing.

Action items before year-end:

• Confirm whether the fund has been formally notified under Section 10(23FE)
• Review whether the planned investment fits a specified infrastructure business or priority sector
• Build a compliance calendar for quarterly statements, annual returns, and the audit report
• Do not assume a future extension beyond March 31, 2030
• If U.S. tax residency or reporting applies, review both Indian and U.S. filing duties early

⚠️ Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.