Consider the following statements: Statement-I: Interest income from the deposits in Infrastructure

Question

Consider the following statements: Statement-I: Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is exempted from tax, but the dividend is taxable. Statement-II: InvITs are recognized as borrowers under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Which one of the following is correct in respect of the above statements?

Accepted Answer

Statement I is incorrect: The Finance (No.2) Act, 2014 introduced a special taxation regime for Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InVIT) (commonly referred to as business trusts). InvITs provide two different types of returns to investors – Dividend Income and Capital Gains. Each type of income has a different tax treatment. Any dividend or interest income that you get from an InvIT is completely taxable as per your Income Tax Slab rate. This income has to be declared every year in your Income Tax Return under the head Income from Other Sources.Statement II is correct: As per the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, borrower means [any person who, or a pooled investment vehicle as defined in clause (da) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) which,] has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution [and includes a person who, or a pooled investment vehicle which,] becomes borrower of a [asset reconstruction company] consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance.