The Central Board of Direct Taxes (CBDT) has issued Circular No. 03 of 2026 dated March 30, 2026, laying down a comprehensive framework for notification and compliance requirements of Sovereign Wealth Funds (SWFs) under Schedule V of the Income-tax Act, 2025.
The circular provides clarity on procedural aspects to facilitate eligible Sovereign Wealth Funds in availing tax exemptions on specified income arising from investments in India. As per the provisions of the Act, such exemptions apply to income in the nature of dividends, interest, specified sums, and long-term capital gains earned from investments in notified infrastructure sectors, subject to prescribed conditions including investment timelines and minimum holding period.
In order to streamline the process of notification, CBDT has prescribed that Sovereign Wealth Funds seeking recognition must submit an application in Form I, as detailed in the Annexure to the circular. The application is required to be filed with the designated Member of CBDT overseeing the Foreign Tax and Tax Research Division.
Further, all notified SWFs shall be required to comply with ongoing reporting obligations, including filing of income tax returns along with audit reports. Additionally, such funds must furnish a quarterly statement in Form II within one month from the end of each quarter, detailing investments made during the period.
The circular categorizes Sovereign Wealth Funds into two groups for compliance purposes. SWFs that have already been notified under section 10(23FE) of the Income-tax Act, 1961 are not required to file a fresh application; however, they must adhere to the requirement of quarterly reporting in Form II. On the other hand, SWFs seeking fresh notification under the Income-tax Act, 2025 are required to submit Form I and subsequently comply with periodic reporting requirements.
CBDT has also assigned responsibility to the Director General of Income-tax (Systems) to develop and implement the necessary data structures, procedures, and digital systems for filing, verification, and secure maintenance of Forms I and II.
This circular shall come into effect from April 1, 2026, and will be applicable for the tax year 2026–27 and subsequent years, thereby providing a structured compliance regime for Sovereign Wealth Funds investing in India’s infrastructure sector.
The Circular can be accessed at: https://www.incometaxindia.gov.in/documents/d/guest/circular-3-2026-pdf
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