Shall You Invest in Infrastructure Funds as Govt Allows 100% Tax Exemption to Sovereign Wealth Fund Investments?


  • 100% tax concession provided to sovereign wealth fund investments on infrastructure - shall you invest in infrastructure mutual funds?
  • If so, then which infra funds should you put your money in? Read on to know the same!

The Union Budget 2020 may not have met the expectations of all, but it has certainly lit up the sentiments of infrastructure, which is going through tough times of late, in India. Yes, the government has allowed 100% tax exemption to sovereign wealth fund investments in infrastructure. If you are not aware of sovereign wealth funds, let’s be told that these are state-owned funds or entities that get money from the government’s reserves. These funds are created to give support to the country’s economy and its people.

With 100% tax concession, all dividends, interest and other incomes of such investors would be tax-free. Now that brings to us a question, is the time ripe for investments in infrastructure mutual funds? Yes, but you need to have a long-term investment approach instead of going for short term gains.

How Will the 100% Tax Exemption Impact Infrastructure Mutual Funds?

The decision to do away with taxing sovereign wealth fund investors will encourage them to invest more in infrastructure assets of the country. This will not only bring in investments into the infrastructure companies but also their stocks listed in the capital market. The bull run in infrastructure stocks will eventually make mutual funds, which invest in such stocks, generate higher returns with surging Net Asset Value (NAV).

What Indicates Infrastructure as a Bright Investment Spot Apart from 100% Tax Concession to Sovereign Wealth Fund Investors?

The government has taken a few more initiatives, apart from allowing 100% rax concession to sovereign wealth funds, to improve the health of the Indian infrastructure. These include the proposal to set up National Investment Clearance Cell for Infrastructure, the launch of National Infrastructure Pipeline worth ₹103 lakh crore, the allocation of ₹22,000 crores for power & renewable energy sector; as well as the government’s plan to build 2000 KM of strategic highways, 11,000 KM of track electrification and its intention to develop 100 more airports by 2024. All these will most likely impact infrastructure stocks positively. The end result will most likely be higher gains for infrastructure funds.

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How Should You Select Infrastructure Mutual Funds?

Even as infrastructure as a sector has fallen flat in recent times, there will be some infra mutual funds that might have outperformed their benchmark and category. So search for those funds and repose your faith in them to deliver you the goods over time. Considering the overall market scenario and the performance, we have listed out a few infrastructure funds that you could think of putting your money in.

Infrastructure Funds1-year Return3-year Return5-year Return10-year Return
DSP T.I.G.E.R Fund13.77%6.61%5.68%8.16%
Franklin Build India Fund8.37%7.76%7.28%14.20%
Tata Infrastructure Fund12.99%6.04%4.97%6.10%

Note – Data sourced from Value Research as on Feb 2, 2020. 

Disclaimer – “Mutual fund investments are subject to market risks. Please read the scheme related documents carefully before investing”.

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