Section 10(23FE) was inserted by Finance Act, 2020 w.e.f. 01.04.2021 wherein any income earned by specified person in the nature of dividend, interest and long term capital gain from the investment made in India shall be exempt.
There are a few conditions linked to this which are as under:
1. The investment needs to be made between 01.04.2020 to 31.03.2024.
2. The investment is held for atleast 3 years.
3. The investment needs to be made in business trust, a company or enterprise developing, maintaining infrastructure etc as mentioned in section 80LA or Category-I or Category-II Alternative Investment Fund regulated by SEBI and having 100% investment in above infrastructure company.
Now the “specified person” mentioned above will include a pension fund, which
(i) is created or established under the law of a foreign country including the laws made by any of its political constituents being a province, State or local body, by whatever name called;
(ii) is not liable to tax in such foreign country;
(iii) satisfies such other conditions as may be prescribed; and
(iv) is specified by the Central Government, by notification in the Official Gazette, for this purpose.
in addition to a wholly owned subsidiary of Abu dhabi investment authority and sovereign wealth fund as mentioned in section 10(23FE).
Further, vide notification 67/2020 Dt. 17.08.2020, CBDT has announced various conditions under rule 2DB which needs to be fulfilled by pension fund to claim such income as exempt:
(i) it is regulated under the law of a foreign country including the laws made by any of its political constituents being a province, state or local body, by whatever name called, under which it is created or established, as the case may be;
(ii) it is responsible for administering or investing the assets for meeting the statutory obligations and defined contributions of one or more funds or plans established for providing retirement, social security, employment, disability, death benefits or any similar compensation to the participants or beneficiaries of such funds or plans, as the case may be;
(iii) the earnings and assets of the pension fund are used only for meeting statutory obligations and defined contributions for participants or beneficiaries of funds or plans referred to in clause (ii) and no portion of the earnings or assets of the pension fund inures any benefit to any other private person;
(iv) it does not undertake any commercial activity whether within or outside India;
(v) it shall intimate the details in respect of each investment made by it in India during the quarter within one month from the end of the quarter in Form No. 10BBB;
(vi) it shall file return of income on or before the due date specified under sub-section (1) of section 139 and furnish along with such return a certificate in Form No. 10BBC in respect of compliance to the provisions of clause (23FE) of section 10, during the financial year, from an accountant as defined in the Explanation below sub-section (2) of section 288.
Further rules 2DC, defines three form as mentioned above which are as under:
Form No. 10BBA: Application for notification under sub-clause (iv) of clause (c) of Explanation to the clause (23FE) of section 10 of the Income-tax Act, 1961
Form No 10BBB: Intimation by Pension Fund of investment under clause (23FE) of section 10 of the Income-tax Act, 1961
Form No 10BBC: Certificate of accountant in respect of compliance to the provisions of clause (23FE) of section 10 of the Income-tax Act, 1961 by the notified Pension Fund.