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UPSC PYQPrelims 2023

Civil Services Examination · Question 21

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
Show answer & explanation

Answer: (D) Statement-I is incorrect but Statement-II is correct

Explanation

Interest distributed by InvITs is taxable for unitholders, while dividends can be exempt, so Statement-I is wrong. The 2021 Finance Act recognised InvITs as borrowers under SARFAESI.