Income tax

Investments & Tax Exemptions: CBDT’s Updated Section 10(23FE Rules

By issuing Notification No. 127/2024, the Central Board of Direct Taxes (CBDT) has amended Section 10(23FE) of the Income-tax Act. The updated rules simplify compliance and increase the range of assets available to pension funds (PFs) and sovereign wealth funds (SWFs). In line with India's economic objectives, these adjustments are meant to draw in long-term investments in the social development and infrastructure sectors.

Overview of the Amendment

The Central Board of Direct Taxes (CBDT) has made significant changes to the provisions under Section 10(23FE) of the Income-tax Act, 1961. With Notification No. 127/2024, dated December 11, 2024, the CBDT updates the reference to F. No. 13/3/2017-INF dated October 11, 2022, replacing the previous reference made in Notification No. 44/2020, dated July 6, 2020.

The amendments take effect immediately upon publication in the official gazette.

Understanding Section 10(23FE)

Section 10(23FE) provides tax exemptions for specified incomes earned by Sovereign Wealth Funds (SWFs) and Pension Funds (PFs). These exemptions aim to encourage investments in critical areas like infrastructure and social development by allowing tax-free returns on eligible investments.

Key Highlights of Notification No. 127/2024

Updated Reference: The new notification replaces the old reference with F. No. 13/1/2017-INF dated October 11, 2022.
Effective Date: The amendments are effective immediately upon publication.
Investment Scope: The permissible scope of investments by SWFs and PFs has been clarified and broadened.
Improved Compliance Framework: New guidelines aim to streamline compliance and ensure robust oversight.

Implications of the Amendment

The amendment brings several advantages, including:

Clearer guidelines for investors, reducing ambiguities.
Encouragement for long-term investments in infrastructure projects.
Alignment of compliance with global standards.
Increased attractiveness of India as an investment destination.

Compliance Requirements

To avail of the tax exemptions, institutions must ensure:

Investments are made in specified infrastructure projects.
Timelines and holding periods are strictly adhered to.
Funds are fully owned and managed by eligible entities.
No usage of funds for personal or prohibited purposes.

Conclusion

Notification No. 127/2024 reinforces the government’s commitment to fostering sustainable investments in vital sectors. By modernizing the compliance framework for Section 10(23FE), the CBDT has made it easier for SWFs and PFs to invest in India’s development priorities. Eligible institutions must stay updated and ensure compliance to maximize benefits.

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Krishna Gopal Varshney

An editor at apnokaca

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Krishna Gopal Varshney, Founder & CEO of Myitronline Global Services Private Limited at Delhi. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. Visit our website for latest Business News and IT Updates.

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