The Central Board of Direct Taxes (CBDT) has extended the tax exemption window for sovereign wealth funds (SWFs) and pension funds investing in Indian infrastructure projects till March 31, 2030. The exemption, available under Section 10(23FE) of the Income Tax Act from 2020, covers income from dividends, interest and long-term capital gains.
While the benefit is targeted at large global investors, experts say it could indirectly shape the investment landscape for Indian retail investors through mutual funds, infrastructure investment trusts (InvITs) and real estate investment trusts (REITs).
Limited direct impact on retail investors
According to Shweta Rajani, head, mutual funds at Anand Rathi Wealth, the move may create a temporary push of liquidity into infrastructure categories.
“The inflows primarily improve funding stability and market liquidity for large institutional investors, but the impact on valuations or returns for retail participants is likely to be short-term and limited,” she said.
Rajani also cautioned against investing in InvITs or REITs solely because of this policy, noting their cyclical nature and relatively poor risk-adjusted returns. “Rolling annual returns between 2020 and 2024 ranged from –7.7 per cent to 9.9 per cent, underperforming broader equity benchmarks,” she added.
Mutual funds may benefit over time
Nishant Shah, partner at Economic Laws Practice, highlighted that stronger foreign participation could indirectly benefit mutual fund investors. “Better-funded infrastructure companies may reflect positively in mutual fund NAVs. Debt mutual funds shall continue to benefit as improved credit quality reduces default risk and enhances returns for retail investors,” he said.
Shah also pointed out that enhanced governance and operational efficiency, which typically come with large institutional investments, could create a more stable environment for long-term investors.
InvITs and REITs: steady but not risk-free
From an InvIT perspective, Sandeep Jain, CFO of NDR InvIT Trust, noted that the extension of favourable tax treatment enhances confidence among global investors. “For Indian retail investors, this translates into an opportunity to co-invest alongside deep-pocketed, long-term institutional players, bringing both credibility and potential risk-adjusted returns,” he said.
However, both Rajani and Shah emphasised that while global capital flows can support valuations and stability, retail investors must remain cautious. Execution risks, regulatory hurdles and economic cycles continue to influence infrastructure projects.
The takeaway
For retail investors, the CBDT move does not alter personal tax liabilities but strengthens India’s case as a long-term infrastructure destination. The indirect benefits may flow into mutual funds, InvITs and listed companies over time, though experts recommend diversification and caution rather than chasing infra-linked products purely on the back of this policy change.