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India Eyes Tax Exemptions for Global Funds
5 Jan
Summary
- Proposal to exempt Sovereign Wealth Funds from equity tax.
- Tax relief extension considered for market investments.
- Aims to attract stable capital amid FPI outflows.
India is exploring a significant tax policy shift, proposing exemptions for Sovereign Wealth Funds (SWFs) and other pools of patient capital on their earnings from the Indian equity market. This initiative comes in response to substantial stock sell-offs by foreign fund managers in 2025, which saw net outflows of ₹1.58 lakh crore.
The proposal, discussed recently with industry professionals, suggests extending tax benefits beyond existing exemptions for infrastructure investments. The focus is on attracting stable, long-term capital from entities like SWFs, which are typically arms of governments and not taxed in their home jurisdictions, potentially requiring amendments to the Income Tax Act.
This consideration by New Delhi is timely, as foreign portfolio investors (FPIs) have registered considerable outflows. While SWFs may prioritize economic objectives over tax advantages, a tax exemption could signal India's commitment to fostering patient capital, alongside exploring fiscal incentives for corporate R&D spending.
