Schedule V explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Serial numbers 7 and 8 of the Table in Schedule V to the Income-tax Act, 2025 deal with income that a "specified person", such as a sovereign wealth fund or a pension fund, earns from investments in India. Serial number 7 excludes dividend, interest, certain other sums and long-term capital gains from total income if a list of conditions is met; serial number 8 refers to two clauses of the Income-tax Act, 1961. Note 5 defines the terms. Serial numbers 1 to 6 are in our note on Schedule V, serial numbers 1 to 6.
This explanation is as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026. Under section 1(3) the Act came into force on the 1st April, 2026, save as otherwise provided. Later amendments, rules and notifications should be checked. For where the earlier Act's provisions on exempt income sit in the 2025 Act, see our mapping note on exemptions and the Schedules.
Under serial number 7, a specified person is not charged on dividend, interest, certain sums under section 92(2)(k) and long-term capital gains from an investment made in India if the investment is made on or after 1 April 2020 but on or before 31 March 2030, is held for at least three years, and is in one of five kinds of investee. If the specified person later fails a condition, the income becomes chargeable as income of that tax year. A sovereign wealth fund or pension fund with loans or borrowings for investing in India is deemed not eligible. For planning questions on cross-border investment see tax planning advisory.
Serial number 7: the row
| Serial number | Income (column B) | Eligible persons (column C) |
|---|---|---|
| 7 | Any income of the nature of (a) dividend; (b) interest; (c) any sum referred to in section 92(2)(k); or (d) long-term capital gains (whether or not such capital gains are deemed as short-term capital gains under section 76), arising from an investment made by a specified person in India, whether in the form of debt or share capital or unit | A specified person |
Serial number 7: the conditions in column D
(a) The investment must satisfy all three tests:
- (i) it is made on or after the 1st April, 2020 but on or before the 31st March, 2030;
- (ii) it is held for at least three years; and
- (iii) it is in: (A) a business trust being an eligible InvIT; (B) an eligible infrastructure entity; (C) an eligible Alternate Investment Fund; (D) an eligible domestic company; or (E) an eligible Non-Banking Financial Company.
(b) to (c) Guidelines. If any difficulty arises in interpreting or implementing the provisions, the Board may issue guidelines, which shall be issued with the previous approval of the Central Government, laid before each House of Parliament, and binding on the Income-tax Authority and the specified person.
(d) Failure of conditions. Where any income has not been included in the total income of the specified person, and subsequently during any tax year the specified person fails to satisfy any of these conditions so that the income would not have been eligible for non-inclusion, such income is chargeable to income-tax as the income of the specified person of that tax year.
(e) Eligible Alternate Investment Fund. Where it has investment of less than hundred per cent in one or more of the eligible infrastructure entity, eligible domestic company, eligible Non-Banking Financial Company or eligible InvIT, the exempt income accrued, arisen, received or attributable to such investment, directly or indirectly, is calculated proportionately to the investment made in those entities, in such manner as may be prescribed.
(f) Eligible domestic company. Where it has investment of less than hundred per cent in one or more eligible infrastructure entities, the exempt income is calculated proportionately to the investment made in the eligible infrastructure entities, in the prescribed manner.
(g) Eligible Non-Banking Financial Company. Where it has lending of less than hundred per cent in one or more eligible infrastructure entities, the exempt income is calculated proportionately to the lending made in eligible infrastructure entities, in the prescribed manner.
(h) Loans and borrowings. If a sovereign wealth fund or pension fund has loans or borrowings, directly or indirectly, for the purposes of making investment in India, it is deemed not eligible for exclusion from total income.
The prescribed manner of computing proportions is left to the Income-tax Rules, 2026 and is not in the text consulted; the Act prints no formula.
Serial number 8
| Serial number | Income (column B) |
|---|---|
| 8 | Any income falling under section 10(23F) and (23FA) of the Income-tax Act, 1961 (43 of 1961), subject to the conditions as specified therein |
The Act itself names these clauses of the Income-tax Act, 1961; they are quoted as printed and nothing more is said about them.
Note 5: the definitions for serial number 7
| Term | Meaning in Note 5 |
|---|---|
| Specified person | (i) A wholly owned subsidiary of the Abu Dhabi Investment Authority which is a resident of the United Arab Emirates and makes investment, directly or indirectly, out of the fund owned by the Government of Abu Dhabi; (ii) a sovereign wealth fund satisfying conditions (A) to (G); (iii) a pension fund satisfying conditions (A) to (E); (iv) the Public Investment Fund of the Government of the Kingdom of Saudi Arabia; or (v) a wholly owned subsidiary of that Fund which is a resident of Saudi Arabia and makes investment, directly or indirectly, out of the fund owned by such Government |
| Investee | A business trust, eligible infrastructure entity, eligible Alternate Investment Fund, eligible domestic company or eligible Non-Banking Financial Company in which the sovereign wealth fund or pension fund has made the investment directly or indirectly |
| Loan and borrowing | For a sovereign wealth fund, any loan taken or borrowing from, or any deposit or investment made in it by, any person other than the Government of the country where it is set up; for a pension fund, any loan or borrowing from, or deposit or investment made in it by, any person, not including deposits or investments representing statutory obligations and defined contributions of funds or plans for retirement, social security, employment, disability or death benefits, or similar compensation to participants or beneficiaries |
| Eligible infrastructure entity | A company, enterprise or entity carrying on the business of developing, or operating and maintaining, or developing, operating and maintaining an infrastructure facility as defined in section 138, or such other business as the Central Government may specify by notification |
| Eligible Alternate Investment Fund | A Category-I or Category-II Alternative Investment Fund regulated under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, having not less than 50% investment in one or more of the eligible infrastructure entity, eligible domestic company, eligible Non-Banking Financial Company or eligible InvIT, computed in the prescribed manner |
| Eligible domestic company | A domestic company set up and registered on or after the 1st April, 2021, having minimum 75% investments in one or more eligible infrastructure entities, computed in the prescribed manner |
| Eligible Non-Banking Financial Company | A non-banking financial company registered as an Infrastructure Finance Company as referred to in notification number RBI/2009-10/316 issued by the Reserve Bank of India, or in an Infrastructure Debt Fund, a non-banking finance company as referred to in the Reserve Bank of India (Non-Banking Financial Company-Scale Based Regulations) Directions, 2023, and having minimum 90% lending to one or more eligible infrastructure entities, computed in the prescribed manner |
| Eligible InvIT | An Infrastructure Investment Trust referred to in section 2(21)(a) |
Conditions for a sovereign wealth fund (Note 5(a)(ii))
(A) wholly owned and controlled, directly or indirectly, by the government of a foreign country; (B) set up and regulated under the law of that country; (C) earnings credited to the account of that government or another account it designates, so that no portion of the earnings enures any benefit to any private person; (D) assets vest in that government upon dissolution; (E) items (C) and (D) do not apply to payments to creditors or depositors for loan taken or borrowing for purposes other than making investment in India; (F) it does not participate in the day-to-day operations of the investee, but a monitoring mechanism, including the right to appoint directors or executive director, is not such participation; and (G) it is specified by the Central Government by notification and fulfils the conditions in that notification.
Conditions for a pension fund (Note 5(a)(iii))
(A) created or established under the law of a foreign country, including laws of its provinces, States or local bodies; (B) not liable to tax in that country or, if liable, exempt for all its income; (C) does not participate in the day-to-day operations of the investee (monitoring mechanism excepted as above); (D) specified by the Central Government by notification and fulfils the conditions in it; and (E) satisfies such other conditions as may be prescribed.
Who has been specified by notification is not in the text consulted.
A worked example (names and dates assumed)
Meridian Sovereign Fund, wholly owned by a foreign government, is a specified person that meets the Note 5 conditions (assumed). It invests in an eligible InvIT on 15 August 2022 and sells the units on 20 October 2026 with a long-term capital gain.
- Condition (a)(i): 15 August 2022 is on or after 1 April 2020 and on or before 31 March 2030. Met.
- Condition (a)(ii): held from 15 August 2022 to 20 October 2026, a little over four years, which is at least three years. Met.
- Condition (a)(iii): the investee is an eligible InvIT (A). Met. The gain is therefore not included in total income under serial number 7.
- Had it sold on 1 June 2025, the holding would have been under three years (15 August 2022 to 1 June 2025 is under three years), and condition (a)(ii) would not be met.
- If in a later tax year Meridian takes a loan for the purposes of investing in India, condition (h) deems it not eligible, and under condition (d) the income not included earlier becomes chargeable as income of that tax year.
Need help with cross-border investment income?
These conditions turn on dates, holding periods, the kind of investee and borrowings. Our tax planning advisory team can test an investment structure against them.
Key takeaways
- Serial number 7 covers dividend, interest, certain section 92(2)(k) sums and long-term capital gains of a specified person on investments in India.
- Investment must be made on or after 1 April 2020 and on or before 31 March 2030, and held for at least three years.
- The investee must be an eligible InvIT, infrastructure entity, Alternate Investment Fund, domestic company or Non-Banking Financial Company.
- Partial investments give proportionate exemption, in the prescribed manner.
- A later failure makes the income chargeable in that tax year, and borrowing for investment in India deems a sovereign wealth or pension fund not eligible.
- Serial number 8 refers to two clauses of the Income-tax Act, 1961, as printed.
Read next
- Schedule V, serial numbers 1 to 6: investment funds, business trusts and venture capital
- Schedule IV, serial numbers 1 to 8: income of non-residents
- Section 92: income from other sources
- Schedule VII: persons exempt from tax, serial numbers 1 to 24
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.