A foreign pension fund wants to put money into our infrastructure company and says its Indian income will be exempt. What does it actually have to do to get and keep that exemption, and by when must the money come in?
The exemption is for a 'specified person' — broadly a notified sovereign wealth fund or a notified pension fund, together with the funds named in the provision itself — on income of the nature of dividend, interest and long-term capital gains from an investment made in India in one of the eligible vehicles. Three things govern it. The investment must be made within a window that now closes on 31 March 2030; the investment must be held for at least three years; and the fund must satisfy the conditions in the provision and in any notification specifying it. For a notified pension fund, rule 2DB of the Income-tax Rules, 1962 adds conditions of its own: the fund must be regulated under the law of a foreign country, must be responsible for administering or investing assets for meeting statutory obligations and defined contributions of participants or beneficiaries, must apply its earnings and assets only to those obligations, must intimate the particulars of each investment in Form No. 10BBB within one month from the end of the quarter in which the investment is made, and must file its return of income by the due date under section 139(1) together with a certificate in Form No. 10BBC from an accountant. Under the Income-tax Act, 2025 the same exemption is at Schedule V, Table serial number 7.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text), reported as Section 10(23FE) of the Income-tax Act, 1961, with rule 2DB of the Income-tax Rules, 1962; Schedule V, Table serial number 7, to the Income-tax Act, 2025. It bears on section 10(23FE), section Rule 2DB, section 139(1), section Schedule V (Act of 2025) of the Income Tax Act 1961, in Capital Gains Exemptions, Capital Gains and Residence & Treaty Benefit matters.
The money at stake here is large and the exemption is conditional all the way through, which is an unusual combination. A fund does not simply qualify. For everything outside the handful of entities named in the provision, the fund has to be specified by the Central Government by notification, and the notification's own conditions become part of the entitlement. That is the first thing a practitioner should read, and it is often shorter and stricter than the statute: the January 2026 notification, for example, opens the fund's window only from the date of its own publication, so a fund notified late cannot reach back to investments it made while the application was pending. The second thing is that the conditions are continuing. Most exemptions are tested once, at the moment income arises. This one is tested every quarter. Rule 2DB requires the particulars of each investment to be intimated in Form No. 10BBB within one month from the end of the quarter in which it was made, and requires the return to be filed by the due date under section 139(1) with a certificate in Form No. 10BBC from an accountant. A fund that files its Indian return late has not merely attracted interest; it has failed a condition on which the exemption depends. The same goes for the prohibitions carried in the notifications — separately maintained accounts, no borrowing for the purpose of the Indian investments, no participation in day-to-day operations of the investee. A representative on the investee's board doing operational work is a compliance risk to the whole exemption, not a governance question. The third is the arithmetic of time. The window closes on 31 March 2030 and the holding requirement is three years. An investment made in the final weeks of the window still has to be held to 2033 to be safe, and a disposal inside three years puts the relief for that investment in issue. Fund managers plan exits on a different clock from tax counsel, and this is the provision where the two have to be made to agree before the money goes in, not afterwards.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Schedule V of the Income-tax Act, 2025, headed 'Income not to be included in total income of certain eligible persons including investment funds, business trusts and their unit holders' and serving section 11 of that Act, contains at Table serial number 7 an entry whose eligible person is 'a specified person' and whose exempt income is 'any income of the nature of— (a) dividend; (b) interest; (c) any sum referred to in section 92(2)(k); or (d) long-term capital gains'. The entry applies to an investment made on or after 1 April 2020 but on or before 31 March 2030, held for at least three years, in one of five categories: a business trust being an eligible infrastructure investment trust, an eligible infrastructure entity, an eligible alternative investment fund, an eligible domestic company and an eligible non-banking financial company. Note S to that entry defines 'specified person' to include wholly owned subsidiaries of the Abu Dhabi Investment Authority, sovereign wealth funds, pension funds, the Public Investment Fund of Saudi Arabia and wholly owned subsidiaries of it; clause (G) of Note S(a)(ii) covers a fund that 'is specified by the Central Government, by notification for this purpose and fulfils the conditions specified in such notification'. Under the Income-tax Act, 1961, notification S.O. 44(E) dated 5 January 2026, issued by the Central Board of Direct Taxes, is made under 'sub-clause (iv) of clause (c) of the Explanation 1 to clause (23FE) of section 10 of the Income-tax Act, 1961 (43 of 1961)' and specifies a pension fund in respect of eligible investments made in India 'on or after the date of publication of this notification ... but on or before the 31st day of March, 2030'. It imposes nine conditions, among them filing the return of income by the prescribed due date, intimating investment particulars quarterly in Form No. 10BBB, furnishing a compliance certificate in Form No. 10BBC, maintaining segmented accounts, continued regulation under the law of the foreign country, use of earnings exclusively for statutory obligations to beneficiaries, no borrowings for the purpose of the Indian investments, and no participation in the day-to-day operations of the investee. Rule 2DB of the Income-tax Rules, 1962, headed 'Other conditions to be satisfied by the pension fund', requires the fund to be regulated under the law of a foreign country, to be responsible for administering or investing assets for meeting statutory obligations and defined contributions of participants or beneficiaries for retirement, social security, employment, disability, death benefits or similar compensation, to use its earnings and assets only for meeting those obligations with the exceptions stated, to intimate the details of each investment 'within one month from the end of the quarter in Form No. 10BBB', and to furnish a return of income by the due date under section 139(1) together with a certificate in Form No. 10BBC from an accountant.
The exemption belongs to a specified person, and being a specified person is itself conditional: for a fund that is not named in the provision, on a specification by the Central Government by notification and on fulfilment of the conditions in that notification. The income covered is dividend, interest and long-term capital gains from an investment made in India in one of the eligible categories. Two dates and one period govern the relief: the investment must be made on or after 1 April 2020 and on or before 31 March 2030, and must be held for at least three years. For a pension fund, rule 2DB adds regulatory, purpose and application-of-assets conditions, a quarterly intimation in Form No. 10BBB within one month from the end of the quarter, and a return filed by the due date under section 139(1) with a certificate in Form No. 10BBC. Under the Income-tax Act, 2025 the same relief is at Schedule V, Table serial number 7.
Not applicable — this is a statement of the exemption as printed in Schedule V of the Income-tax Act, 2025, of a notification made under clause (23FE) of section 10 of the Income-tax Act, 1961, and of rule 2DB of the Income-tax Rules, 1962. No judicial reasoning is involved, and no decision on the clause was located.
…is specified by the Central Government, by notification for this purpose and fulfils the conditions specified in such notification
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Handle my notice → Ask a CA on WhatsAppThe exemption is for a 'specified person' — broadly a notified sovereign wealth fund or a notified pension fund, together with the funds named in the provision itself — on income of the nature of dividend, interest and long-term capital gains from an investment made in India in one of the eligible vehicles. Three things govern it. The investment must be made within a window that now closes on 31 March 2030; the investment must be held for at least three years; and the fund must satisfy the conditions in the provision and in any notification specifying it. For a notified pension fund, rule 2DB of the Income-tax Rules, 1962 adds conditions of its own: the fund must be regulated under the law of a foreign country, must be responsible for administering or investing assets for meeting statutory obligations and defined contributions of participants or beneficiaries, must apply its earnings and assets only to those obligations, must intimate the particulars of each investment in Form No. 10BBB within one month from the end of the quarter in which the investment is made, and must file its return of income by the due date under section 139(1) together with a certificate in Form No. 10BBC from an accountant. Under the Income-tax Act, 2025 the same exemption is at Schedule V, Table serial number 7. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 10(23FE), section Rule 2DB, section 139(1), section Schedule V (Act of 2025) of the Income Tax Act 1961. It is reported as Section 10(23FE) of the Income-tax Act, 1961, with rule 2DB of the Income-tax Rules, 1962; Schedule V, Table serial number 7, to the Income-tax Act, 2025. The money at stake here is large and the exemption is conditional all the way through, which is an unusual combination. A fund does not simply qualify. For everything outside the handful of entities named in the provision, the fund has to be specified by the Central Government by notification, and the notification's own conditions become part of the entitlement. That is the first thing a practitioner should read, and it is often shorter and stricter than the statute: the January 2026 notification, for example, opens the fund's window only from the date of its own publication, so a fund notified late cannot reach back to investments it made while the application was pending. The second thing is that the conditions are continuing. Most exemptions are tested once, at the moment income arises. This one is tested every quarter. Rule 2DB requires the particulars of each investment to be intimated in Form No. 10BBB within one month from the end of the quarter in which it was made, and requires the return to be filed by the due date under section 139(1) with a certificate in Form No. 10BBC from an accountant. A fund that files its Indian return late has not merely attracted interest; it has failed a condition on which the exemption depends. The same goes for the prohibitions carried in the notifications — separately maintained accounts, no borrowing for the purpose of the Indian investments, no participation in day-to-day operations of the investee. A representative on the investee's board doing operational work is a compliance risk to the whole exemption, not a governance question. The third is the arithmetic of time. The window closes on 31 March 2030 and the holding requirement is three years. An investment made in the final weeks of the window still has to be held to 2033 to be safe, and a disposal inside three years puts the relief for that investment in issue. Fund managers plan exits on a different clock from tax counsel, and this is the provision where the two have to be made to agree before the money goes in, not afterwards. If it applies to you, the first step is this: Settle the fund's status first. The exemption is confined to a 'specified person'. For a fund that is not named in the provision itself, that means a specification by the Central Government by notification, and the notification carries its own conditions which are part of the entitlement.
Schedule V of the Income-tax Act, 2025, headed 'Income not to be included in total income of certain eligible persons including investment funds, business trusts and their unit holders' and serving section 11 of that Act, contains at Table serial number 7 an entry whose eligible person is 'a specified person' and whose exempt income is 'any income of the nature of— (a) dividend; (b) interest; (c) any sum referred to in section 92(2)(k); or (d) long-term capital gains'. The entry applies to an investment made on or after 1 April 2020 but on or before 31 March 2030, held for at least three years, in one of five categories: a business trust being an eligible infrastructure investment trust, an eligible infrastructure entity, an eligible alternative investment fund, an eligible domestic company and an eligible non-banking financial company. Note S to that entry defines 'specified person' to include wholly owned subsidiaries of the Abu Dhabi Investment Authority, sovereign wealth funds, pension funds, the Public Investment Fund of Saudi Arabia and wholly owned subsidiaries of it; clause (G) of Note S(a)(ii) covers a fund that 'is specified by the Central Government, by notification for this purpose and fulfils the conditions specified in such notification'. Under the Income-tax Act, 1961, notification S.O. 44(E) dated 5 January 2026, issued by the Central Board of Direct Taxes, is made under 'sub-clause (iv) of clause (c) of the Explanation 1 to clause (23FE) of section 10 of the Income-tax Act, 1961 (43 of 1961)' and specifies a pension fund in respect of eligible investments made in India 'on or after the date of publication of this notification ... but on or before the 31st day of March, 2030'. It imposes nine conditions, among them filing the return of income by the prescribed due date, intimating investment particulars quarterly in Form No. 10BBB, furnishing a compliance certificate in Form No. 10BBC, maintaining segmented accounts, continued regulation under the law of the foreign country, use of earnings exclusively for statutory obligations to beneficiaries, no borrowings for the purpose of the Indian investments, and no participation in the day-to-day operations of the investee. Rule 2DB of the Income-tax Rules, 1962, headed 'Other conditions to be satisfied by the pension fund', requires the fund to be regulated under the law of a foreign country, to be responsible for administering or investing assets for meeting statutory obligations and defined contributions of participants or beneficiaries for retirement, social security, employment, disability, death benefits or similar compensation, to use its earnings and assets only for meeting those obligations with the exceptions stated, to intimate the details of each investment 'within one month from the end of the quarter in Form No. 10BBB', and to furnish a return of income by the due date under section 139(1) together with a certificate in Form No. 10BBC from an accountant. It was decided by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. The exemption belongs to a specified person, and being a specified person is itself conditional: for a fund that is not named in the provision, on a specification by the Central Government by notification and on fulfilment of the conditions in that notification. The income covered is dividend, interest and long-term capital gains from an investment made in India in one of the eligible categories. Two dates and one period govern the relief: the investment must be made on or after 1 April 2020 and on or before 31 March 2030, and must be held for at least three years. For a pension fund, rule 2DB adds regulatory, purpose and application-of-assets conditions, a quarterly intimation in Form No. 10BBB within one month from the end of the quarter, and a return filed by the due date under section 139(1) with a certificate in Form No. 10BBC. Under the Income-tax Act, 2025 the same relief is at Schedule V, Table serial number 7.
Not applicable — this is a statement of the exemption as printed in Schedule V of the Income-tax Act, 2025, of a notification made under clause (23FE) of section 10 of the Income-tax Act, 1961, and of rule 2DB of the Income-tax Rules, 1962. No judicial reasoning is involved, and no decision on the clause was located. In the words reproduced by the source cited on this page: "…is specified by the Central Government, by notification for this purpose and fulfils the conditions specified in such notification"
It was decided by the CBDT Circulars & Instructions and is reported as Section 10(23FE) of the Income-tax Act, 1961, with rule 2DB of the Income-tax Rules, 1962; Schedule V, Table serial number 7, to the Income-tax Act, 2025. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 10(23FE), section Rule 2DB, section 139(1), section Schedule V (Act of 2025), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The exemption belongs to a specified person, and being a specified person is itself conditional: for a fund that is not named in the provision, on a specification by the Central Government by notification and on fulfilment of the conditions in that notification. The income covered is dividend, interest and long-term capital gains from an investment made in India in one of the eligible categories. Two dates and one period govern the relief: the investment must be made on or after 1 April 2020 and on or before 31 March 2030, and must be held for at least three years. For a pension fund, rule 2DB adds regulatory, purpose and application-of-assets conditions, a quarterly intimation in Form No. 10BBB within one month from the end of the quarter, and a return filed by the due date under section 139(1) with a certificate in Form No. 10BBC. Under the Income-tax Act, 2025 the same relief is at Schedule V, Table serial number 7. It arises in Capital Gains Exemptions, Capital Gains and Residence & Treaty Benefit matters, on section 10(23FE), section Rule 2DB, section 139(1), section Schedule V (Act of 2025) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Diarise 31 March 2030. An investment made after that date does not qualify, however eligible the vehicle and however long it is then held. Where a fund has been notified, read its own notification too: the notification specifying a fund may open the window only from the date of its publication, so the fund's effective window can be shorter than the statutory one. Hold for three years, and treat that as a condition of the exemption rather than a holding-period rule for rates. The relief is expressed as depending on the investment being held for at least three years. Check the vehicle against the list before committing. The eligible categories are a business trust that is an eligible infrastructure investment trust, an eligible infrastructure entity, an eligible alternative investment fund, an eligible domestic company and an eligible non-banking financial company. An investment that does not answer to one of those descriptions is outside the relief. For a pension fund, put rule 2DB on the compliance calendar. Form No. 10BBB goes in within one month from the end of the quarter in which the investment is made — quarterly, not annually — and a missed quarter is a breach of a condition of exemption, not a late filing. File the return by the due date under section 139(1), with the accountant's certificate in Form No. 10BBC. Rule 2DB conditions the exemption on the return going in on time, so a belated return is a substantive problem here in a way it is not for most exempt entities. Keep the Indian investments in segregated accounts and keep them unborrowed. Notifications specifying funds under this provision have required separately maintained accounts for the Indian investments, have prohibited borrowing for the purpose of making them, and have prohibited day-to-day participation in the operations of the investee. For an investment or a year falling on or after 1 April 2026, work from Schedule V, Table serial number 7 of the Income-tax Act, 2025, which carries the same exemption with the same window and the same three-year holding.
Searched for later treatment; none was found. That is not the same as a source affirming it. The exemption survives the change of Act and the investment window has been extended. Schedule V of the Income-tax Act, 2025 carries the entry at Table serial number 7 with an investment window opening on 1 April 2020 and closing on 31 March 2030, and with a holding requirement of at least three years. Notification S.O. 44(E) of 5 January 2026, made under clause (23FE) of section 10 of the Income-tax Act, 1961, uses the same closing date of 31 March 2030 for the fund it specifies. Those two independent government sources agree, which is the evidence available here that the window now runs to 2030 and not to the earlier date the clause originally carried. Circular No. 3/2026 of 30 March 2026 is titled as a notification of a sovereign wealth fund under Schedule V, Table serial number 7, Note S(a)(ii)(G) of the Income-tax Act, 2025, which confirms that the notification machinery has moved to that Schedule. A limit on this entry should be read before it is relied on. The enacted words of clause (23FE) of section 10 of the Income-tax Act, 1961 were NOT obtained. The published texts of section 10 available here stop within clause (23C) and do not reach clause (23FE) at all. The structure of the exemption set out above — the four kinds of income, the five categories of eligible investment, the window and the three-year holding — is taken from the Schedule V entry of the 2025 Act and from the notification, not transcribed from clause (23FE). The two correspond, but a practitioner advising on a year governed by the 1961 Act should read the clause itself, in particular Explanation 1, which contains the definitions and the sub-clause under which a fund is notified. No amending Act has been read, so the date on which the window was extended is not stated. No judicial decision on clause (23FE) has been traced. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Sourcing for this entry is mixed and the reader should know how. The structure of the exemption is taken from Schedule V, Table serial number 7 and Note S of the Income-tax Act, 2025. Rule 2DB is taken from the Income-tax Rules, 1962. Notification S.O. 44(E) of 5 January 2026 has been read in the Department's own publication of it; it is made under sub-clause (iv) of clause (c) of Explanation 1 to clause (23FE) of section 10 of the Income-tax Act, 1961 and carries the 31 March 2030 date and the nine conditions. Circular No. 3/2026 of 30 March 2026 is identified by its title, which names Schedule V, Table serial number 7, Note S(a)(ii)(G) of the Income-tax Act, 2025; the circular's own text has not been read and nothing is taken from it beyond that title. WHAT COULD NOT BE ESTABLISHED, PLAINLY. The enacted words of clause (23FE) of section 10 of the Income-tax Act, 1961 have not been obtained. Every published text of section 10 available here stops within clause (23C). Explanation 1 to the clause, which contains the definitions of sovereign wealth fund and pension fund and the sub-clauses under which a fund is notified, has therefore not been read; what is said about it here is limited to the citation printed in the notification itself. Nothing in this entry should be treated as a transcription of the 1961 Act clause. The five categories of eligible investment are named as the Schedule V entry names them, in that Act's own vocabulary, and the defined terms behind each of them — what makes an infrastructure entity, an alternative investment fund, a domestic company or a non-banking financial company 'eligible' — have not been read and are not stated. Rule 2DC and rule 2DCA, if they exist, have not been read; only rule 2DB has. The conditions applicable to a sovereign wealth fund as distinct from a pension fund are therefore not set out. Forms No. 10BBB and No. 10BBC are named because rule 2DB and the notification name them; neither form has been read. No date is given on this entry because no amendment footnote for the clause has been read, and no judicial decision on it has been traced. For a tax year beginning before 1 April 2026 the 1961 Act continues to govern under section 536(2)(c) of the 2025 Act, so a fund with investments already made will have both provisions in play at once, and the two should be read side by side rather than one substituted for the other. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The exemption belongs to a specified person, and being a specified person is itself conditional: for a fund that is not named in the provision, on a specification by the Central Government by notification and on fulfilment of the conditions in that notification. The income covered is dividend, interest and long-term capital gains from an investment made in India in one of the eligible categories. Two dates and one period govern the relief: the investment must be made on or after 1 April 2020 and on or before 31 March 2030, and must be held for at least three years. For a pension fund, rule 2DB adds regulatory, purpose and application-of-assets conditions, a quarterly intimation in Form No. 10BBB within one month from the end of the quarter, and a return filed by the due date under section 139(1) with a certificate in Form No. 10BBC. Under the Income-tax Act, 2025 the same relief is at Schedule V, Table serial number 7.
TaxSphere, “Statutory position — s.10(23FE): the sovereign wealth fund and pension fund exemption, the window that closes on 31 March 2030, the three-year holding and the two forms that keep it alive”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-10-23fe-the-sovereign-wealth-fund-and-pension-fund-exemption-and-the-31-march-2030-window/ (validity last checked 2026-09-23)
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