{"id":1654,"date":"2024-03-28T14:57:46","date_gmt":"2024-03-28T09:27:46","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1654"},"modified":"2024-04-03T07:21:08","modified_gmt":"2024-04-03T01:51:08","slug":"q-consider-the-following-statements-53","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-consider-the-following-statements-53","title":{"rendered":"Q. Consider the following statements:"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><strong>Statement-I<\/strong>: Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is&nbsp;<strong>exempted from tax<\/strong>, but the dividend is taxable.<br><strong>Statement-II<\/strong>: InviTs are recognized as borrowers under the \u2018Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002\u2019.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Which one of the following is correct in respect of the above statements?<\/p>\n\n\n\n<ul class=\"mcq wp-block-list\">\n<li>Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-1<\/li>\n\n\n\n<li>Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-1<\/li>\n\n\n\n<li>Statement-1 is correct but Statement-II is incorrect<\/li>\n\n\n\n<li>Statement-I is incorrect Statement-II is correct<\/li>\n<\/ul>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><strong>Answer: (d) Statement-I is incorrect Statement-II is correct<\/strong><\/p>\n<\/blockquote>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"infrastructure-investment-trust-invits\">Infrastructure Investment Trust (InvITs)<\/h5>\n\n\n\n<ul class=\"wp-block-list\">\n<li>An Infrastructure Investment Trust (InvITs) is&nbsp;<strong>Collective Investment Scheme<\/strong>&nbsp;similar to a mutual fund, which enables&nbsp;<strong>direct investment of money from individual and institutional investors in infrastructure projects<\/strong>&nbsp;to earn a small portion of the income as return.<\/li>\n\n\n\n<li>They are&nbsp;<strong>designed to pool small sums of money<\/strong>&nbsp;from a number of investors to invest in assets that give cash flow over a period of time. Part of this cash flow would be distributed as&nbsp;<strong>dividend<\/strong>&nbsp;back to investors.<\/li>\n\n\n\n<li>The minimum investment amount in an InvIT\u00a0<strong>Initial Public Offering<\/strong>\u00a0(IPO) is Rs 10 lakh, therefore, InvITs are\u00a0<strong>suitable for high networth individuals, institutional and non-institutional investors.<\/strong>\n<ul class=\"wp-block-list\">\n<li>Some part of the investment is used by the InvIT as\u00a0<strong>loan<\/strong>\u00a0while other portion is used as\u00a0<strong>capital<\/strong>. Hence, the unit holders receive returns in the form of Dividend and Interest.\u00a0<strong>Both the dividend and interest are taxed.<\/strong>\n<ul class=\"wp-block-list\">\n<li>If the investor receives profit upon selling his units,<strong>&nbsp;Capital gains tax<\/strong>&nbsp;is imposed on any such gain.&nbsp;<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>InvITs are&nbsp;<strong>listed on exchanges just like stocks<\/strong>&nbsp;\u2014 through IPOs. However, the Indian InvIT market is not yet mature and has supported the formation of 10 InvITs till date of which&nbsp;<strong>only two are listed.<\/strong><\/li>\n\n\n\n<li>InvITs are\u00a0<strong>regulated by<\/strong>\u00a0the\u00a0<strong>Securities and Exchange Board of India&nbsp;(SEBI) (Infrastructure Investment Trusts) Regulations, 2014.<\/strong>\n<ul class=\"wp-block-list\">\n<li>As per the SEBI regulations<strong>, InvITs must invest at least 80% of their assets in projects that are completed and revenue-generating<\/strong>. This lowers the risk for investors as this reduces the typical risk associated with the infrastructure sector i.e. delay in completion, due to lack of regulatory approvals, poor project management etc.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>InvITs and REITs are recognised as borrowers under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act<\/strong>. This enables the investors, especially banks, to initiate action against the trustees of InvITs in case of any default.<\/li>\n\n\n\n<li><strong>Structure of InvIT:<\/strong>\n<ul class=\"wp-block-list\">\n<li>Like mutual funds, they have a<strong>&nbsp;trustee, sponsor(s), investment manager&nbsp;<\/strong>and<strong>&nbsp;project manager.<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Trustee<\/strong>&nbsp;has the responsibility of inspecting the performance of an InvIT.<\/li>\n\n\n\n<li><strong>Sponsor(s)<\/strong>&nbsp;are promoters of the company that set up the InvIT.<\/li>\n\n\n\n<li><strong>Investment manager<\/strong>&nbsp;is entrusted with the task of supervising the assets and investments of the InvIT.<\/li>\n\n\n\n<li><strong>Project manager<\/strong>&nbsp;is responsible for the execution of the project.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The InvITs listed on the stock exchange are&nbsp;<strong>IRB InvIT Fund<\/strong>&nbsp;and&nbsp;<strong>India Grid Trust.<\/strong><\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lotusarise.com\/wp-content\/uploads\/2024\/02\/InvITs-Infrastructure-Investment-Trust-1024x513.webp\" alt=\"InvITs (Infrastructure Investment Trust)\" class=\"wp-image-48409\" title=\"Upsc prelims research: indian economy 2023 1\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>NHAI InvIT<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It is the infrastructure investment trust&nbsp;<strong>sponsored by the National Highways Authority of India (NHAI)<\/strong>&nbsp;to support the government\u2019s National Monetisation Pipeline (NMP).<\/li>\n\n\n\n<li>It is a Trust established by NHAI&nbsp;<strong>under the Indian Trusts Act, 1882<\/strong>&nbsp;and&nbsp;<strong>SEBI&nbsp;<\/strong>(Security and Exchange Board of India)&nbsp;<strong>regulations<\/strong>.<\/li>\n<\/ul>\n\n\n\n<h6 class=\"wp-block-heading\" id=\"real-estate-investment-trust-reit\">Real Estate Investment Trust (REIT)<\/h6>\n\n\n\n<ul class=\"wp-block-list\">\n<li>REIT refers to\u00a0<strong>an entity created with the sole purpose of channeling investible funds<\/strong>\u00a0into\u00a0<strong>operating, owning or financing income-producing real estate.<\/strong>\n<ul class=\"wp-block-list\">\n<li>In simple language, it is a&nbsp;<strong>company that allows individuals to invest in large-scale, income-producing real estate<\/strong>. These may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans.<\/li>\n\n\n\n<li>REITs provide a way for individual investors&nbsp;<strong>to earn a share of the income produced through commercial real estate ownership<\/strong>&nbsp;\u2013 without actually having to go out and buy commercial real estate.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>REITs are modeled on the lines of mutual funds<\/strong>&nbsp;and provide investors with an extremely liquid way to get a stake in real estate.<\/li>\n\n\n\n<li>It is a&nbsp;<strong>type of security that provides all types of investors, big or small, with an outlet for regular income, portfolio diversification, and long-term capital appreciation.<\/strong>&nbsp;Like any other security, REITs can enlist themselves on a stock exchange.<\/li>\n\n\n\n<li>In India, the&nbsp;<strong>REIT were introduced by the SEBI in 2007.<\/strong><\/li>\n\n\n\n<li><strong>Taxation on REITs<\/strong>:\n<ul class=\"wp-block-list\">\n<li><strong>Income from sale of REIT units<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Capital gains<\/strong>&nbsp;from sale of Indian REIT units are subject to&nbsp;<strong>Short-term capital gains<\/strong>&nbsp;tax at 15% if held for less than one year.<\/li>\n\n\n\n<li>Units held for more than three years (36 months) are subject to (<strong>Long Term Capital gains Tax<\/strong>) LTCG tax at 10% if they result in an income over Rs.1 lakh.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Interest income from REITs is taxable.&nbsp;<\/strong><\/li>\n\n\n\n<li><strong>Dividend income from REITs is taxable<\/strong>\u00a0depending on the REIT\u2019s special tax concession status.\n<ol class=\"wp-block-list\">\n<li>If a special tax concession has been obtained, dividend income is taxable in the hands of the investor.&nbsp;<\/li>\n\n\n\n<li>If not, dividend income is not taxable.&nbsp;<\/li>\n<\/ol>\n<\/li>\n\n\n\n<li><strong>Income from the amortization of Special Purpose Vehicle (SPV) debt is not taxable<\/strong>&nbsp;in the hands of the investor.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lotusarise.com\/wp-content\/uploads\/2024\/02\/REITs-1024x732.png\" alt=\"REITs\" class=\"wp-image-48411\" title=\"Upsc prelims research: indian economy 2023 2\"\/><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>Statement-I: Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is&nbsp;exempted from tax, but the dividend is taxable.Statement-II: InviTs are recognized as borrowers under the \u2018Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002\u2019. Which one of the following is correct in respect of the above&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[50],"class_list":["post-1654","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-50"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":50,"label":"2023"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1654","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=1654"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1654\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=1654"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=1654"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=1654"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=1654"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}