Niti Aayog suggests tax incentives for investment in InvITs

To attract retail and institutional investors to achieve the goals of the National Monetisation Pipeline Scheme (NMP), Niti Aayog has suggested to the government to provide tax incentives for investment in InvITs, and bring them under the IBC. InvITs are pooled investment vehicles that draw institutions and wealthy individual investors with returns from underlying assets such as the toll road. The Aayog released a report on NMP this month in consultation with infra line ministries.

IBC provisions to give more protection for investors

The Aayog has recommended allowing tax benefits in Infrastructure Investment Trust (InvITs) as eligible security to invest under Section 54EC of the Income-Tax Act, 1961, are important starting points for initiating retail participation in the instruments. They are tax-efficient and user-friendly, it added.

In the NMP guidebook Aayog has noted that trusts are not considered as legal person under the extent regulations, the Insolvency and Bankruptcy Code (IBC) regulations are not applicable for InvIT loans. Hence, existing process for recourse to project assets are not available for lenders.

It also observed that under IBC regulations will bring in an added level of comfort for the investors along with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Recovery of Debts and Bankruptcy Act, 1993

Finance Minister Nirmala Sitharaman on August 23 had announced a Rs 6 lakh crore NMP scheme that will look to unlock value in infrastructure assets across sectors, ranging from power to road and railways.
She had also said the asset monetisation does not involve the selling of land and it is about monetising brownfield assets.