This article covers “Daily Current Affairs” and the topic details “Infrastructure Investment Trusts (InvITs)”. This

 INFRASTRUCTURE INVESTMENT TRUSTS (INVITS)

This article covers “Daily Current Affairs” and the topic details “Infrastructure Investment Trusts (InvITs)”. This

topic has relevance in the Economy section of the UPSC CSE exam.

GS 3: Economy

Why in the news?

As per SEBI data, the period from April to September in the fiscal year 2023-24 saw a total collection of Rs

18,658 crore through these emerging investment instruments. Out of this amount, Rs 12,753 crore was raised

via InvITs, while the remaining Rs 5,905 crore was collected through REITs.

Introduction

 Infrastructure Investment Trusts (InvITs) are investment vehicles designed to facilitate investments in

infrastructure assets, making them accessible to both private and retail investors. These trusts operate in a

manner similar to mutual funds and focus on long-term infrastructure projects, including roads, gas

pipelines, transmission lines, and renewable assets, among others. They are subject to regulation by SEBI

(Securities and Exchange Board of India).

Design and Features of InvITs

 InvITs are structured as tiered entities, with a sponsor establishing the InvIT. This trust, in turn, invests in

eligible infrastructure projects, either directly or through special purpose vehicles (SPVs).

Investor Eligibility

 InvITs have a minimum subscription limit of 1 lakh, allowing not only institutional investors like banks,

insurance companies, pension funds, and sovereign wealth funds to participate but also retail investors.

Investors in InvITs receive units, making them unit holders.

Returns on Investment

 Investments made by InvITs are divided into two components: loan and capital. Consequently, unit holders

receive returns in the form of both dividends and interest, both of which are subject to taxation. If unit

holders make a profit from selling their units, capital gains tax is applicable.

Reduced Risk

 SEBI regulations mandate that InvITs must allocate a minimum of 80% of their assets to completed and

revenue-generating projects. This significantly reduces the risks typically associated with infrastructure

investments, such as delays due to regulatory approvals or poor project management.

Legal Recognition

 InvITs, along with Real Estate Investment Trusts (REITs), are recognized as borrowers under the

Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI)

Act. This legal status empowers investors, particularly banks, to take action against InvIT trustees in the

event of defaults.

SOURCE:

REITs, InvITs collect ₹18,658 crore in Apr-Sep on robust infra demand – The Hindu BusinessLine

Q.1 Consider the following statements:

Statement-I: The interest income generated from deposits in Infrastructure Investment Trusts (InvITs) and

distributed to their investors enjoys tax exemption, while dividends are subject to taxation.

Statement-II: InvITs are accorded recognition as borrowers under the ‘Securitization and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002,’ providing them with certain legal status and

privileges in financial matters.

Which one of the following is correct in respect of the above statements?

(a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I

(b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for

Statement-I

(c) Statement-I is correct but Statement-II is incorrect

(d) Statement-I is incorrect but Statement-II is correct

ANSWER: D

Q.2 Regarding Infrastructure Investment Trusts (InvITs), read the following statements:

1. SEBI regulates InvITs.

2. InvITs are required to invest exclusively in infrastructure projects that are finished and producing revenue.

3. The returns generated from investments in InvITs are tax-exempt.

How many of the above statement/s is/are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

ANSWER: A

Q.3 Discuss the role and significance of Infrastructure Investment Trusts (InvITs) in facilitating

infrastructure development and attracting investment in the Indian infrastructure sector.