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?

Answer: D. Statement-I is incorrect; Statement-II is correct. Statement-I: 'Interest income from InvIT deposits is tax-exempt but dividend is taxable' is WRONG. In Indian taxation of InvITs: - INTEREST income distributed by InvITs to unitholders IS TAXABLE at the unitholder's slab rate (with TDS at 10% for residents). - DIVIDEND income from InvITs is also taxable in the hands of unitholders if the SPV has opted for the new concessional corporate tax regime; otherwise exempt under specific conditions. The blanket statement that interest is exempt and dividends taxable is inverted/inaccurate. Statement-II: 'InvITs recognized as borrowers under SARFAESI Act 2002' is CORRECT. The SARFAESI Amendment Act 2016 and subsequent notifications recognised InvITs as eligible borrowers, allowing banks to enforce security interests against InvIT assets via the SARFAESI mechanism. Source: SEBI InvIT Regulations / Income Tax Act provisions on Business Trusts / SARFAESI amendments.