Schedule V — INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF CERTAIN ELIGIBLE PERSONS INCLUDING INVESTMENT FUNDS, BUSINESS TRUSTS AND THEIR UNIT HOLDERS

[See section 11]
INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF CERTAIN
ELIGIBLE PERSONS INCLUDING INVESTMENT FUNDS,
BUSINESS TRUSTS AND THEIR UNIT HOLDERS
In computing the total income of a tax year of any eligible person mentioned in
column C of the Table below, the income mentioned in column B of the said Table
shall not be included, subject to the conditions mentioned in column D of the said
Table, and the expressions used in columns B to D of the said Table shall have the
meanings respectively assigned to them in Notes below the said Table:
TABLE
Sl.
No.
Income not to be
included in total
income
Eligible persons Conditions
A B C D
1. Any income other
than the income
chargeable under
the head “Profits and
gains of business or
profession”.
An investment
fund.
Nil.
40. Inserted by the Finance Act, 2026, w.e.f. 1-4-2026.
Sl.
No.
Income not to be
included in total
income
Eligible persons Conditions
A B C D
2. Any income referred
to in section 224,
accruing or arising
to, or received being
that proportion of
income which is of
the same nature as
income chargeable
under the head
“Profits and gains
of business or
profession”.
A unit holder of
an investment
fund.
Nil.
3. Any income by way
of—
( a) interest re -
ceived or re -
ceivable from
a special pur -
pose vehicle; or
( b) dividend re -
ceived or re -
ceivable from
a special pur -
pose vehicle.
A business trust. Nil.
4. Any income by way
of renting or leasing
or letting out any real
estate asset owned
directly by such
business trust.
A business trust,
being a real
estate invest -
ment trust.
Nil.
5. Any distributed
income referred to
in section 223.
Any unit holder
of a business
trust.
Exemption shall not be allowed
on that proportion of the income
which is of the same nature as––
( a) interest received or receivable
from a special purpose vehi-
cle by the business trust; or
( b) dividend received or receiv -
able from a special purpose
vehicle by the business trust
(in a case where the special
purpose vehicle has exercised
the option under section 200);
or
Sl.
No.
Income not to be
included in total
income
Eligible persons Conditions
A B C D
( c) income of a business trust,
being a real estate investment
trust, by way of renting or
leasing or letting out any real
estate asset owned directly by
such business trust.
6. Any income from
investment in a ven-
ture capital under -
taking.
Venture capital
company or
venture capital
fund other than
an investment
fund specified in
section 224(10)
(a).
Nil.
7. Any income of the
nature of––
( a) dividend;
( b) interest;
( c) any sum re -
ferred to in sec-
tion 92(2)( k);
or
( d) long-term cap-
ital gains (whe-
ther or not such
capital gains
are deemed as
short-term cap-
ital 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 per -
son.
( a) Such investment—
( i) is made on or after the
1st April, 2020 but on or
before the 31st March,
2030;
( ii) is held for at least three
years; and
( iii) is in,—
( A) a business trust
being an eligible
InvIT;
( B) an eligible infra -
structure entity;
( C) an eligible Alter -
nate Investment
Fund;
( D) an eligible domes-
tic company; or
( E) an eligible Non-
banking Finan -
cial Company;
( b) if any difficulty arises in in -
terpreting or implementing
the provisions, the Board may
issue guidelines;
( c) such guidelines shall be––
( i) issued with the previous
approval of the Central
Government;
Sl.
No.
Income not to be
included in total
income
Eligible persons Conditions
A B C D
( ii) laid before each House
of Parliament; and
( iii) binding on the Income-
tax Authority and the
specified person;
( d) where any income has not
been included in the total in-
come of the specified person,
and subsequently during any
tax year the specified person
fails to satisfy any of these
conditions so that the said
income would not have been
eligible for such non-inclu -
sion, such income shall be
chargeable to income-tax as
the income of the specified
person of that tax year;
( e) where an eligible Alternate
Investment Fund has invest-
ment of less than 100% in
one or more of eligible in -
frastructure entity or eligible
domestic company or eligible
Non-Banking Financial Com-
pany or in an eligible InvIT,
income accrued or arisen or
received or attributable to
such investment, directly or
indirectly, which is exempt
herein shall be calculated pro-
portionately to that invest -
ment made in one or more
of the eligible infrastructure
entity or eligible domestic
company or eligible Non-
Banking Financial Company
or in an eligible InvIT, in such
manner as may be prescribed;
( f) where an eligible domestic
company has investment of
less than 100% in one or more
Sl.
No.
Income not to be
included in total
income
Eligible persons Conditions
A B C D
of the eligible infrastructure
entity, income accrued or
arisen or received or attrib -
utable to such investments,
directly or indirectly, which
is exempt herein shall be
calculated proportionately to
the investment made in one
or more of the eligible infra-
structure entity, in such man-
ner, as may be prescribed;
( g) where an eligible Non-Bank-
ing Financial Company has
lending of less than 100% in
one or more of the eligible
infrastructure entity, income
accrued or arisen or received
or attributable to such lend-
ing, directly or indirectly,
which is exempt herein shall
be calculated proportion -
ately to the lending made in
eligible infrastructure entity,
in such manner, as may be
prescribed;
( h) in case a sovereign wealth
fund or pension fund has
loans or borrowings, directly
or indirectly, for the purpos-
es of making investment in
India, such fund shall be
deemed to be not eligible for
exclusion from total income.
8. Any income fall -
ing under section
10(23F) and ( 23FA)
of the Income-tax
Act, 1961 (43 of
1961), subject to the
conditions as speci -
fied therein.
Note 1.—For the purposes of Sl. Nos. 1 and 2, the expression “investment fund” shall have
the meaning assigned to it in section 224(10)(a).
Note 2.—For the purposes of Sl. No. 3, the expression “special purpose vehicle” means an
Indian company in which the business trust holds controlling interest and any specific per -
centage of shareholding or interest, as may be required by the law under which such trust
is granted registration.
Note 3.—For the purposes of Sl. Nos. 4 and 5, the expression “real estate asset” shall have the
same meaning as assigned to it in regulation 2( 1)(zj) of the Securities and Exchange Board
of India (Real Estate Investment Trusts) Regulations, 2014 made under the Securities and
Exchange Board of India Act, 1992 (15 of 1992).
Note 4.—For the purposes of Sl. No. 6,––
( a) “venture capital company” means a company which—
( i) has been granted a certificate of registration, before the 21st May, 2012, as
a Venture Capital Fund and is regulated under the Securities and Exchange
Board of India (Venture Capital Funds) Regulations, 1996 (herein referred
to as the Venture Capital Funds Regulations) made under the Securities
and Exchange Board of India Act, 1992 (15 of 1992); or
( ii) has been granted a certificate of registration as Venture Capital Fund as a
sub-category of Category I Alternative Investment Fund and is regulated
under the Securities and Exchange Board of India (Alternative Investment
Funds) Regulations, 2012 (herein referred to as the Alternative Investment
Funds Regulations) made under the Securities and Exchange Board of
India Act, 1992 (15 of 1992), and which fulfils the following conditions:—
( A) it is not listed on a recognised stock exchange;
( B) it has invested not less than two-thirds of its investible funds in un-
listed equity shares or equity linked instruments of venture capital
undertaking; and
( C) it has not invested in any venture capital undertaking in which its
director or a substantial shareholder (being a beneficial owner of
equity shares exceeding 10% of its equity share capital) holds, either
individually or collectively, equity shares in excess of 15% of the
paid-up equity share capital of such venture capital undertaking;
( b) “venture capital fund” means a fund—
( i) operating under a trust deed registered under the provisions of the Regis-
tration Act, 1908 (16 of 1908), which—
( A) has been granted a certificate of registration, before the 21st May,
2012, as a Venture Capital Fund and is regulated under the Venture
Capital Funds Regulations; or
( B) has been granted a certificate of registration as Venture Capital
Fund as a sub-category of Category I Alternative Investment Fund
under the Alternative Investment Funds Regulations or as referred
to in regulation 18(2) of the International Financial Services Centres
Authority (Fund Management) Regulations, 2022 made under the
International Financial Services Centres Authority Act, 2019 (50 of
2019), and which fulfils the following conditions:—
( I) it has invested not less than two-thirds of its investible funds in
unlisted equity shares or equity linked instruments of venture
capital undertaking;
( II) it has not invested in any venture capital undertaking in which
its trustee or the settler holds, either individually or collectively,
equity shares in excess of 15% of the paid-up equity share
capital of such venture capital undertaking;
( III) the units, if any, issued by it are not listed in any recognised
stock exchange; and
( IV) any other condition as may be prescribed; or
( ii) operating as a venture capital scheme made by the Unit Trust of India;
( c) “venture capital undertaking” means—
( i) a venture capital undertaking as defined in regulation 2(n) of the Securities
and Exchange Board of India (Venture Capital Funds) Regulations, 1996;
or
( ii) a venture capital undertaking as defined in regulation 2( 1)(aa) of the
Securities and Exchange Board of India (Alternative Investment Funds)
Regulations, 2012.
Note 5.—For the purposes of Sl. No. 7,––
( a) “specified person” means—
( i) a wholly owned subsidiary of the Abu Dhabi Investment Authority, which—
( A) is a resident of the United Arab Emirates; and
( B) makes investment, directly or indirectly, out of the fund owned by
the Government of Abu Dhabi;
( ii) a sovereign wealth fund, which satisfies the following conditions:—
( A) it is wholly owned and controlled, directly or indirectly, by the gov-
ernment of a foreign country;
( B) it is set up and regulated under the law of such foreign country;
( C) the earnings of the said fund are credited either to the account of the
government of that foreign country or to any other account designated
by that government so that no portion of the earnings enures any
benefit to any private person;
( D) the asset of the said fund vests in the government of such foreign
country upon dissolution;
( E) the provisions of items ( C) and (D) shall not apply to any payment
made to creditors or depositors for loan taken or borrowing for the
purposes other than for making investment in India;
( F) it does not participate in the day-to-day operations of investee but the
monitoring mechanism to protect the investment with the investee
including the right to appoint directors or executive director shall
not be considered as participation in the day to day operations of
the investee; and
( G) it is specified by the Central Government, by notification for this
purpose and fulfils the conditions specified in such notification;
( iii) a pension fund, which—
( A) is created or established under the law of a foreign country including
the laws made by any of its political constituents, being a province,
State or local body, by whatever name called;
( B) is not liable to tax in such foreign country or if liable to tax, exemption
from taxation for all its income has been provided by such foreign
country;
( C) does not participate in the day-to-day operations of investee but the
monitoring mechanism to protect the investment with the investee
including the right to appoint directors or executive director shall
not be considered as participation in day-to-day operations of the
investee;
( D) is specified by the Central Government, by notification for this pur-
pose and fulfils conditions specified in such notification; and
( E) satisfies such other conditions as may be prescribed;
( iv) the Public Investment Fund of the Government of the Kingdom of Saudi
Arabia;
( v) a wholly owned subsidiary of the Public Investment Fund of the Government
of the Kingdom of Saudi Arabia, which––
( A) is a resident of Saudi Arabia; and
( B) makes investment, directly or indirectly, out of the fund owned by
such Government;
( b) “investee” means a business trust or eligible infrastructure entity or eligible Al -
ternate Investment Fund or eligible domestic company or eligible Non-Banking
Financial Company, in which the sovereign wealth fund or the pension fund has
made the investment directly or indirectly;
( c) “loan and borrowing” means—
( i) any loan taken or borrowing by a sovereign wealth fund from or any deposit
or investment made in a sovereign wealth fund by, any person other than
the Government of the country in which the sovereign wealth fund is set
up;
( ii) any loan taken or borrowing by a pension fund from or any deposit or
investment made in a pension fund by any person, but shall not include––
( A) the deposit or investment which represents statutory obligations and
defined contributions of one or more funds or plans established for
providing retirement, social security, employment, disability or death
benefits; or
( B) any similar compensation to the participants or beneficiaries of such
funds or plans, as the case may be;
( d) “eligible infrastructure entity” means a company or enterprise or an entity carrying
on––
(i) the business of developing, or operating and maintaining, or developing,
operating and maintaining an infrastructure facility as defined in section
138; or
( ii) such other business as the Central Government may, by notification, specify
in this behalf;
( e) “eligible Alternate Investment Fund” means Category-I or Category-II Alternative
Investment Fund––
( i) regulated under the Securities and Exchange Board of India
(Alternative Investment Funds) Regulations, 2012 made under the Securities
and Exchange Board of India Act, 1992 (15 of 1992);
( ii) having not less than 50% investment in one or more of the eligible infra -
structure entity or eligible domestic company or eligible Non-Banking
Financial Company or in an eligible InvIT, computed in such manner as
may be prescribed;
( f) “eligible domestic company” means a domestic company––
( i) set up and registered on or after the 1st April, 2021; and
( ii) having minimum 75% investments in one or more of the eligible infrastruc-
ture entities, computed in such manner, as may be prescribed;
( g) “eligible Non-Banking Financial Company” means––
( i) 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, issued by
the Reserve Bank of India; and
( ii) having minimum 90% lending to one or more of eligible infrastructure
entities, computed in such manner, as may be prescribed; and
( h) “eligible InvIT” means an Infrastructure Investment Trust referred to in section
2(21)(a).