Pension Fund Tax Exemption in India: Investing Before 2030

India’s pension fund tax exemption, which also covers notified sovereign wealth funds, ADIA’s UAE subsidiaries and Saudi Arabia’s PIF, takes specified income (dividends, interest and long-term capital gains) from qualifying Indian infrastructure investments out of total income. It does not cover every receipt of an eligible fund, and through an AIF, company or NBFC only the share attributable to infrastructure investment is exempt, under proportional rules. It applies only to money invested by 31 March 2030 and kept in for at least three years. A fund weighing an Indian infrastructure commitment, and a sponsor raising from one, should confirm three things before money moves: the investor’s status, the date in its own notification, and the investee’s ratios.

Pension fund tax exemption in India at a glance

Item	Position
Where the law is	Schedule V, Table Sl. No. 7, Income-tax Act 2025 (formerly s.10(23FE) of the 1961 Act)
Income covered	Dividends, interest, long-term capital gains and sums under s.92(2)(k)
Last investment date	31 March 2030, and any earlier date in the fund’s own notification
Minimum hold	Three years from each investment
Qualifying investees	InvITs, infrastructure entities, Category I/II AIFs (50%+), domestic companies set up from April 2021 (75%+), infrastructure NBFCs (90%+)
Borrowing	No borrowing for the purpose of investing in India
Forms	174 to 177, Income-tax Rules 2026

Who qualifies

The Act names five kinds of investor (Note 5(a), Schedule V); PIF and its subsidiaries are two of them:

Foreign pension funds, notified by the Central Government. The fund must be set up under foreign law, be untaxed or fully exempt at home, and stay passive in the investee (board seats are allowed). Rule 282 of the Income-tax Rules 2026 adds that its assets must serve retirement, social security and similar obligations, with up to 10% in other government-owned assets.
Sovereign wealth funds, notified, and wholly owned and controlled, directly or indirectly, by a foreign government, with earnings and assets going to that government.
ADIA’s wholly owned subsidiaries that are UAE resident and invest Abu Dhabi Government money. ADIA itself relies instead on the government article of the India–UAE treaty; see the India–UAE tax treaty guide.
PIF, and its Saudi-resident wholly owned subsidiaries, named in the Act itself.

An ordinary holding company owned by a fund is not on this list. Its exit tax depends on its own treaty; see where India still cannot tax your exit and choosing a holding company jurisdiction.

What qualifies

The money must go into one of five investees (col D(a)(iii)):

an InvIT;
a company or entity that develops, operates or maintains infrastructure;
a SEBI-regulated Category I or II AIF with at least 50% in qualifying infrastructure investments;
a domestic company set up on or after 1 April 2021 with at least 75% in infrastructure entities;
an infrastructure finance company or infrastructure debt fund NBFC lending at least 90% to infrastructure entities.

Through an AIF, company or NBFC, only income traced to the infrastructure part is exempt (col D(e)–(g); r.283(6)–(8)). The ratios are tested on audited balance sheets, year by year and cumulatively from 2021-22 (r.283(2)–(4)). Investments the AIF, company or NBFC makes after 31 March 2030 do not count (r.283(12)(c)–(d)).

The dates that decide it

The fund’s notification date. Only investment made on or after the date the fund’s notification was published counts (the notification’s own wording; r.283(6)–(8)).
The notification’s end date. Each notification sets its own last date. Those we read originally said 31 March 2024. Amendments of 18 July 2024 moved it to 31 March 2025, and amendments dated 11 July 2025 moved it again, fund by fund, to 31 March 2030 (e.g. Notification No. 111/2025, S.O. 3165(E)). Check that your own notification carries both amendments.
31 March 2030. The statutory deadline (col D(a)(i)), extended from 2025 by the Finance Act 2025 with effect from 1 April 2025 (CBDT Circular 11 of 2025). The investment itself must be made by that date. A commitment signed or approved before then but funded later may not qualify.
Three years from each investment. The hold can run past 2030.

Investments made between 1 April and 11 July 2025 need closer review. Each July amendment applies “except as respects things done or omitted to be done” in that period, and how that treats an investment made then is a question of interpretation.

Example. A notified sovereign fund subscribes for InvIT units on 15 February 2030, inside both its notification and the statute. It must keep them until at least 15 February 2033. If it sells in 2032, the income left out in earlier years becomes taxable in the year of the sale (col D(d)).

What can undo the exemption

An early exit, by the fund or, on CBDT’s guidance (Circular 9 of 2022), by the AIF, company or NBFC with the fund’s money.
Borrowing. A fund with loans or borrowings “for the purposes of making investment in India” is ineligible (col D(h)). For a sovereign fund, money put in by anyone other than its government counts as borrowing (Note 5(c)(i)).
A ratio shortfall at the AIF, company or NBFC. On CBDT’s guidance, past exemptions are kept, but nothing is exempt from the year the ratio slips.
Missed conditions. Three kinds are separate: eligibility conditions in Schedule V and, for pension funds, r.282; conditions in the fund’s own notification; and periodic reporting, such as quarterly statements and the accountant’s certificate. The consequence depends on which is breached and on CBDT’s guidance (Circular 9 of 2022, para 4.4): a breach of the notification’s audit or segmented-account condition ends the exemption only from that year, while, as a general rule and subject to the exceptions in paras 4.1 and 4.3, other breaches of the essential conditions bring earlier exempt income to tax in the year of breach.
GAAR, which applies “Irrespective of anything contained in this Act” (s.178(1)). The carve-out for investments made before 1 April 2017 (r.128(1)(d)) is no help here.

What Indian sponsors should build in

InvITs, AIFs and infrastructure companies raising from these funds carry part of the compliance:

Form 177. Any qualifying AIF, company or NBFC holding a specified investor’s money files this statement each tax year until the money goes back (r.283(9)–(11)).
Ratio tracking. For AIFs and companies, deployment within three months of receipt counts towards the ratio (r.283(2)(c), (3)(c)).
Tracing. Records should show which investments and income come from each fund’s money.
Exit timing. On CBDT’s guidance, selling an infrastructure asset bought with a fund’s money within three years can cost the fund its exemption.
GIFT City. The AIF limb refers to funds under SEBI’s AIF Regulations. UAE investors weighing an IFSC fund should test that point; see the UAE–India corridor via GIFT City.

Common questions

Do foreign pension funds pay tax in India on infrastructure investments?

Not on dividends, interest and long-term gains, if the fund is notified, invests in a qualifying investee by 31 March 2030 and holds for three years (Schedule V, Sl. No. 7).

Has the investment deadline moved to 2030?

Yes, in the statute: 31 March 2030. A fund’s own notification may still need checking.

Can a fund still apply for notification?

A pension fund applies in Form No. 174 (r.282(2)). The 2026 Rules prescribe no form for sovereign funds, and we found no later circular.

Does PIF need a notification?

No. The Act now names PIF and its Saudi-resident wholly owned subsidiaries.

Points to review

Status. The investor’s limb is confirmed, and for a notified fund the notification and its July 2025 amendment are on file.
Dates. Each investment date falls on or after the notification date and by the end date; investments made between 1 April and 11 July 2025 are reviewed separately.
Investee. The AIF, company or NBFC ratio is tested on audited balance sheets, and the infrastructure income is traced.
Funding. The source of each Indian drawdown is documented as non-borrowed.
Hold and exits. Three-year dates are tracked at every layer before any sale or redemption.
Filings. For a pension fund, Forms 175 and 176 and the return; for each investee, Form 177; for a sovereign fund, the conditions in its own notification.

Sources

Income-tax Act 2025, Schedule V, Table Sl. No. 7 and Note 5. Income Tax Department. https://www.incometaxindia.gov.in/w/schedule-v-3 [ITA2025_ScheduleV.txt]
Income-tax Act 2025, s.178. Income Tax Department. https://www.incometaxindia.gov.in/w/section-178-77 [ITA2025_s178.txt]
Income-tax Rules 2026, G.S.R. 198(E), 20 March 2026 (rr.128, 282, 283; Forms 174–177). CBDT. https://www.incometaxindia.gov.in/documents/81799/11848482/En-Notified-IT-Rules-2026-20-03-2026.pdf/a332bf2a-da14-8b94-dde2-5a2ea1428318?t=1773990110473 [GIFT_IT_RULES_2026.txt]
CBDT Notification No. 55/2026, G.S.R. 241(E), 31 March 2026 (r.128). CBDT. https://www.incometaxindia.gov.in/documents/d/guest/notification-no-55-2026-1-pdf [LAW-Tax_CBDT-Notification-55-2026_Rule-128-2026-Rules_31-Mar-2026.txt]
CBDT Circular No. 11 of 2025, 2 September 2025. CBDT. https://www.incometaxindia.gov.in/documents/d/guest/circular-11-2025-pdf [LAW-Tax_CBDT-Circular-11-2025_s10-23FE-modification-of-Circular-9-2022_2-Sep-2025.txt]
CBDT Circular No. 9 of 2022, 9 May 2022, paras 4.1, 4.3, 4.4. CBDT. Official URL not confirmed; reproduction read [LAW-Tax_CBDT-Circular-09-2022_s10-23FE-guidelines_9-May-2022.txt]
CBDT Notification No. 66/2021, S.O. 1856(E), 13 May 2021 (pension fund). CBDT. https://www.incometaxindia.gov.in/documents/d/guest/notification_66_2021-pdf [LAW-Tax_CBDT-Notification-66-2021_OMERS-Administration-Corp-PF_S10-23FE_13-May-2021.txt]
CBDT Notification No. 111/2025, S.O. 3165(E), 11 July 2025. CBDT. https://www.incometaxindia.gov.in/documents/d/guest/notification-111-2025-pdf [LAW-Tax_CBDT-Notifications-S10-23FE-amending-date-to-2030_91-106-111-2025_11-Jul-2025.txt]
Agreement between India and the UAE for the avoidance of double taxation, Art 24. Income Tax Department. https://www.incometaxindia.gov.in/w/uae-comprehensive-agreements-1 [TAX-DTAA_UAE.txt]

India–UAE tax treaty guide for businesses – ADIA’s treaty route and the wider UAE treaty.
Where India still can’t tax your exit – treaty exemptions for investors outside Schedule V.
Choosing a holding company jurisdiction for India – treaty, substance and holding routes compared.
The UAE–India corridor via GIFT City – where an IFSC fund fits for Gulf investors.
India withholding tax rates and repatriation – domestic rates on income that falls outside the exemption.

Disclaimer: This article is general information, not tax or legal advice; rules change, so check the current position and take advice on your facts before acting.