UPSC Previous Year Question | Prelims GS | 2023

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?

  1. Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
  2. Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I
  3. Statement-I is correct but Statement-II is incorrect
  4. Statement-I is incorrect but Statement-II is correct

Answer

Correct Answer

Statement-I is incorrect but Statement-II is correct

Explanation

Actually, interest income distributed by InvITs is taxable in the hands of unit-holders (making Statement-I as framed incorrect), while InvITs are indeed recognized as 'financial institutions'/borrowers eligible under the SARFAESI Act, 2002 (Statement-II correct).

Topics: economy, financial instruments, infrastructure investment trusts, invit taxation