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 Recon- struction of Financial Assets and Enforcement of Security Interest Act, 2002’.

Which one of the following is correct in respect of the above statements? 

(a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I 

(b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I

(c) Statement-I is correct but Statement-II is incorrect

(d) Statement-I is incorrect but Statement-II is correct

Explanation:

Income from InvITs is taxable as per the investor’s slab rate

  • Statement 1 is incorrect: Dividend and interest income from InvITs is completely taxable as per the slab rate of the investor.

Amendments to support InvITs and REITs

  • Statement 2 is correct: In a statement on February 11, 2021, the Finance Ministry announced its intention to introduce amendments to several acts to facilitate funding for the infrastructure and real estate sectors.
  • The amendments will be made to the following acts:
    • Securities Contracts (Regulation) Act (SCRA) 1956
    • Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 copyright©iasexpress.net
    • Recovery of Debts Due to Banks and Financial Institutions Act (‘Recovery of Debts Act’) 1993
  • The purpose of these amendments is to enable infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) to easily access debt financing from investors, including foreign portfolio investors (FPIs).
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