Taxation of Business Trust and Unit Holders - Sinewave Computer Services Pvt Ltd

1. Section 2(13A) – Definition of Business Trust:

Business Trust means a trust registered as,

i) An Infrastructure Investment Trust under the SEBI regulations, 2014; or
ii) A Real Estate Investment Trust under the SEBI regulations, 2014, and

the units of which are required to be listed on recognized stock exchange in accordance with the aforesaid regulations.

2. Section 10(23FC) – Exemption of certain income of business trust:

Any income of business trust by way of:

i) i)Interest from Special Purpose Vehicle(SPV)
ii) Dividend received from Special Purpose Vehicle (SPV) referred to in section 115-O(7).

Shall be exempt from tax.

3. Section 10(23FCA) – Exemption of Rental income of Real Estate Investment Trust:

Any income of a business trust, being a real estate investment trust, by way of renting, leasing or letting out of any real estate asset owned directly by such business trust shall be exempt from tax.

4. Section 10(23FD) – Exemption of income of unit holder of business trust:

Any distributed income, referred to in section 115UA, received by unit holder from the business trust, which is of the nature as the income referred to in sub-clause (a) of section 10(23FC) or 10(23FCA), shall be exempt from tax.

5. Exemption of capital gains in hands of shareholders of SPV:

i)There will be no capital gains on any transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust to the transferor.
ii) Cost of acquisition of the asset shall be deemed to be the cost of acquisition of the shares.
iii) For computing the period of holding, in the case of a capital asset, being a unit of a business trust, there shall be included the period for which the share or shares were held by the assesse.

6. Section 115UA: Tax on income of unit holder and business trust:

i) Any income distributed by business trust to unit holder shall be deemed to be of the same nature and in the same proportion in the hands of the unit holder.
ii) Subject to the provision of section 111A and 112, the total income of a business trust shall be charged to tax at the maximum marginal rate.
iii) If in any previous year, the distributed income or any part thereof, received by a unit holder from the business trust is of the nature as referred to in sub-clause (a) of section 10(23FC) or 10(23FCA), then, such distributed income or part thereof shall be deemed to be income of such unit holder and shall be charged to tax as income of the previous year.