UPSC Prelims 2023 · Question 41 of 97
UPSC Prelims 2023 question on Invits Taxation
- ExamUPSC CSE
- Year2023
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicSecurity Market in India
- DifficultyHard
- TypeAssertion
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?
Show answer
Answer: D. Statement-I is incorrect but Statement-II is correct
Analysis
Hence option (d) — Statement-I is incorrect but Statement-II is correct — is the correct answer.
Statement by statement
Statement I – INCORRECT: The Finance (No.2) Act, 2014 introduced a special taxation regime for REITs and InvITs. InvITs provide two different types of returns to investors — Dividend Income and Capital Gains. Any dividend or interest income that you get from an InvIT is completely taxable as per your Income Tax Slab rate. The interest income is NOT exempted from tax.
Statement II – 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 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. InvITs thus qualify as recognized borrowers under this Act.