UPSC Prelims 2023 Question on –InvIT Taxation and SARFAESI Act
Q. Consider the following statements:
Statement-I: Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is exempt from tax, but the dividend is taxable.
Statement-II: InvITs are recognised as borrowers under the ‘Securitisation 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?
✅ Correct Answer: [D] Statement-I is incorrect, but Statement-II is correct
Explanation:
Statement I: Incorrect. Under the revised tax regime, income distributed by InvITs, including interest income, dividend income, and rental income, is taxable in the hands of investors.
Interest income is taxed at the investor’s applicable income tax rate and is not exempt from tax.
Statement II: Correct. InvITs are recognized as borrowers under the SARFAESI Act, 2002.
The SARFAESI Act provides a framework for enforcement of security interests and facilitates recovery of secured assets in case of default.
