Exemption of any income of a securitization trust from the activity of securitization [Section 10(23DA)] :

 

Section 10(35A)

Exemption of the distributed income referred to in section 115TA (received from a securitization trust) in the hands of the recipient-investor consequent to levy of additional income-tax on such distributed income in the hands of the securitization trust.

(i) Securitization trusts are special purpose entities set up in the form of trust to undertake securitization activities.

(ii) For the purpose of the exemption and taxability provisions under the Income-tax Act, 1961, a ―securitization trust‖ means a trust which is a special purpose distinct entity or special purpose vehicle, the details of which are tabulated hereunder, which fulfills the prescribed conditions –

	Form of trust	Regulation/ Guidelines	Definition under the respective Regulation/Guidelines
(1)	Special purpose distinct entity	SEBI (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008.	Special purpose distinct entity means a trust which acquires debt or receivables out of funds mobilized by it by issuance of securitised debt instruments through one or more schemes, and includes any trust set up by the National Housing Bank or by the NABARD. For this purpose, ―securitised debt instrument‖ means any certificate or instrument, by whatever name called, issued to an investor by any issuer being a special purpose distinct entity which possesses any debt or receivable, including mortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor in such debt or receivable including mortgage debt, as the case may be;
(2)	Special purpose vehicle (SPV)	The guidelines on securitization of standard assets issued by RBI.	SPV means any company, trust, or other entity constituted or established for a specific purpose – (a) activities of which are limited to those for accomplishing the purpose of the company, trust or other entity as the case may be; and (b) which is structured in a manner intended to isolate the corporation, trust or entity as the case may be, from the credit risk of an originator to make it bankruptcy remote.

(iv) A special taxation regime was introduced by the Finance Act, 2013 in respect of taxation of income of securitisation entities, set up as a trust, from the activity of securitisation.

The significant provisions of the special regime are :-

(1) In case of securitisation vehicles which are set up as a trust and the activities of which are regulated by either SEBI or RBI, the income from the activi ty of securitisation of such trusts will be exempt from taxation. Section 10(23DA) exempts any income of a securitization trust from the activity of securitization with effect from A.Y.2014-15.

(2) Chapter XII-EA comprising of sections 115TA, 115TB and 115TC, levies additional income-tax on securitization trusts in respect of income distributed to its investors.

(3) Consequent to the levy of distribution tax, the distributed income referred to in section 115TA received from a securitization trust will be exempt from tax in the hands of the recipient-investor [Section 10(35A)].