Module: | MODULE A: INTERNATIONAL BANKING
Q237: Consider the following statements regarding the tax exemptions available to Sovereign Wealth Funds investing through the offshore centre:
Statement 1: A qualifying Sovereign Wealth Fund that channels its capital into domestic Indian infrastructure projects through an Alternative Investment Fund located in the centre enjoys a 100 percent exemption from domestic income tax on its dividend and interest income.
Statement 2: To qualify for this total tax exemption, the Sovereign Wealth Fund is legally mandated to hold the infrastructure investment for a minimum continuous period of 3 years.
Statement 2: To qualify for this total tax exemption, the Sovereign Wealth Fund is legally mandated to hold the infrastructure investment for a minimum continuous period of 3 years.
✅ Correct Answer: C
Attracting patient, long-term global capital for national building is a primary macroeconomic goal of the zone.
Statement 1 is correct.
Under Section 10 of the domestic Income Tax Act, qualifying foreign Sovereign Wealth Funds and global Pension Funds are granted a 100 percent absolute tax exemption on dividend, interest, and capital gains income if they route their investments into eligible domestic infrastructure projects through recognized Alternative Investment Funds established in the smart city.
Statement 2 is also correct.
This massive fiscal incentive is designed specifically to attract long-term patient capital rather than speculative hot money.
Therefore, the law strictly stipulates a lock-in condition, mandating that the Sovereign Wealth Fund must hold the underlying infrastructure investment for a minimum continuous period of 3 years to retain the tax-exempt status.
Statement 1 is correct.
Under Section 10 of the domestic Income Tax Act, qualifying foreign Sovereign Wealth Funds and global Pension Funds are granted a 100 percent absolute tax exemption on dividend, interest, and capital gains income if they route their investments into eligible domestic infrastructure projects through recognized Alternative Investment Funds established in the smart city.
Statement 2 is also correct.
This massive fiscal incentive is designed specifically to attract long-term patient capital rather than speculative hot money.
Therefore, the law strictly stipulates a lock-in condition, mandating that the Sovereign Wealth Fund must hold the underlying infrastructure investment for a minimum continuous period of 3 years to retain the tax-exempt status.