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01-06-2025
Bureau Report
NEW DELHI: India has agreed to exempt Saudi Arabia’s sovereign wealth fund from a set of foreign portfolio investment rules to attract capital flows and strengthen financial ties between the two nations, two sources said.
The rules, which club investments through various sovereign entities together and cap it at 10% in a single company, have prevented different subsidiaries of the Public Investment Fund from investing more in India, they said.
Indian Prime Minister Narendra Modi visited the Gulf nation in April, when both the countries agreed to promote investment in areas including energy, infrastructure and pharmaceuticals. India is also negotiating a bilateral investment treaty with Saudi Arabia.
The requirement to club investment from different sovereign entities together limits the ability of the Saudi fund and its subsidiaries to invest independently, the first source said, declining to be identified as they were not authorized to speak to the media.
The exemption granted to the fund will allow its various arms to invest separately, enhancing their flexibility in deploying capital into Indian equity markets without breaching regulatory thresholds, he said.
The Finance Ministry and the Saudi fund did not respond to requests for comment.
The Public Investment Fund is one of the largest sovereign wealth funds globally with assets of about $925 billion under management. Its current exposure in India remains limited to $1.5 billion in Jio Platforms, opens new tab and $1.3 billion in Reliance Retail, opens new tab, according to its website.
India, the world’s third-largest oil importer, is looking to draw long-term capital from energy-rich Gulf nations while Saudi Arabia is seeking to expand its investments in fast-growing economies as part of its Vision 2030 diversification strategy.
To achieve these goals, both the nations formed a high-level task force in 2024 to expedite Riyadh’s plan to invest $100 billion in India.
“The progress made by this Task Force in areas such as taxation was also a major breakthrough for greater cooperation in the future,” a joint statement, opens new tab said in April.
“The two sides affirmed their desire to complete negotiations on the BIT at the earliest.”
Recent media reports, opens new tab indicated the government is also exploring tax relief measures for the Public Investment Fund to support India’s infrastructure and energy sectors.
Earlier, India may offer a 10-year tax holiday and streamlined exemptions to Saudi Arabia’s Public Investment Fund (PIF) to boost $100 billion investments in infrastructure and energy. Proposals include benefits under Sections 10(23FE) and 80IA of the Income Tax Act for easier fund inflows.
The Centre is considering tax reliefs for Saudi Arabia’s sovereign wealth fund, as a means to facilitate the proposed $100 billion investments by the West Asian Kingdom in the country’s infrastructure and energy sectors.
According to official sources, the proposals under consideration include a tax holiday of up to 10 years for Saudi Public Investment Fund (PIF) and further streamlining of procedures to make it easier for it to claim tax exemption on dividend, interest and long-term capital gains (LTCG) on investments in infra-assets.
PIF may be given a treatment similar to Abu Dhabi Investment Authority (ADIA), which gets specific tax benefits under the Income Tax Act.
