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?

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Accepted Answer

The correct answer is option D. Statement I is incorrect. As per the Finance (No.2) Act, 2014, both dividend and interest income distributed by Infrastructure Investment Trusts (InvITs) to their investors are fully taxable at the investor's applicable income tax slab rate. They are not exempted from tax. Statement II is correct. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) includes 'pooled investment vehicles' like InvITs within the definition of a 'borrower' if they have received financial assistance from banks or financial institutions. Therefore, Statement I is incorrect, while Statement II is correct. This question tests knowledge of financial instruments and their regulatory and taxation aspects, which are important for understanding capital markets and economic policy.

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