The proposed National Investment and Infrastructure Fund (NIIF) will be formed as one or more alternative investment funds (AIFs), the government said on Tuesday, and indicated that these funds would be set up in a tax-efficient manner to attract investors.
“For Category I and II AIFs, NIIF would be eligible for a pass-through status under the Income Tax Act. In the case of Category III AIF, where pass-through status is not available, all income received by NIIF shall be taxable at its level and any distribution made to the investors would be tax exempt,” the finance ministry said in an office memorandum.
The NIIF, being set up with the aim to catalyse infrastructure development in the country, would have an initial authorised capital of Rs 20,000 crore.
“The government’s share in the corpus of NIIF will be 49% in each entity set up as an AIF and will be neither be increased beyond, not allowed to fall below 49%,” the ministry said in an office memorandum.
The NIIF, which would function as as a sovereign wealth fund, would provide equity or quasi-equity support to NBFCs and financial institutions engaged in infrastructure financing. It would also invest in funds engaged in infrastructure sector, direct equity or debt support to commercially viable projects, both greenfield and brownfield, including stalled projects.
The NIIF is expected to attract overseas sovereign, quasi-sovereign, multilateral and bilateral investors to co-invest in it as anchor investors. It would also leverage the corpus to raise funds from the market.
Besides the government, cash-rich PSUs would also contribute to the NIIF, over and above the government’s 49% equity. Domestic pension funds and National Small Savings could also provide funds to NIIF.
* Government share in each AIF won’t exceed 49%
* Category I & II AIFs are eligible for pass-through status under Income Tax Act
* NIIF to give equity, debt support to financial institutions, projects