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MC Explainer: How are InvITs taxed?

For both retail individuals as well as HNIs, InvITs are fast becoming the vehicle of choice for investing in India’s infrastructure growth story. So it’s important to understand how your income will be taxed.

January 23, 2023 / 06:31 AM IST

In the first part of this three-part series to educate our readers about infrastructure trusts, or InvITs,  we had discussed the basics, and why they should be part of your portfolio.

InvITs are trusts that manage income-generating infrastructure assets, typically offering investors a regular yield and a liquid method of investing in infrastructure projects. The asset may be held directly or via an SPV.

InvITs are a new asset class, and investors have many questions about how income from an InvIT is taxed.

Remember, this is not straightforward income such as interest on bank deposits or capital appreciation on other asset classes. This income has three different elements, namely interest, capital appreciation, and dividend. Allow me to address some of the questions about how an InvIT's income distribution is taxed.