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TAXATION OF BUSINESS TRUST AND UNIT HOLDERS - Section 10(23FC), 10(23FCA), 10(23FD)

Income Tax - Tax Liability in special Circumstances / Specific Cases - 22 - TAXATION OF BUSINESS TRUST AND UNIT HOLDERS (1) As per section 10(23)FC, any income of a business trust by way of interest received or receivable from special purpose vehicle (SPV) or dividend referred u/s 115-O(7) shall be exempt from tax Note:- Business Trust means a trust registered as an infrastructure investment Trust or a Real Estate Investment Trust, in accordance with the regulations made under the Securities Exc .....

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ust. For the purposes of this clause, the expression real estate asset shall have the same meaning as assigned to it in clause (zj) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992. (2) As per section 10(23FD), any distributed income refer to section 115UA received by a unit holder from the business trust not being that proportion of the income whic .....

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rred to in sub-clause (a) of section 10(23FCA), it shall be exempt in his hands as per section 10(23FD). (3) Any income in the nature of capital gain in the hands of shareholder of Special purpose vehicle (SPV) shall be exempt u/s 47(xvii), it means there will be no capital gain on any transfer of a capital asset being the share of SPV to business trust in exchange of unit allotted by that trust to the transferor. Explanation for the purpose of this clause the meaning of SPV shall be as mentione .....

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THE TOTAL INCOME SHALL BE THE AGGREGATE OF- The transaction of sale of such equity share or unit is entered into on or after 14.10.2004 (a)The amount of income-tax calculated on such short-term capital gains at the rate of fifteen per cent; and Such transaction is chargeable to securities transaction tax, (b)The amount of income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee; Provided further that the provisions of this sect .....

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he transaction of sale of such equity share or unit is entered into on or after 1.10.2004 and Such transaction is chargeable to securities transaction tax. Provided further that the provisions of this clause shall not apply in respect of any income arising from transfer of units of a business trust which were acquired in consideration of a transfer referred to in clause (xvii) of section 47. (Proviso Added by Finance Act, 2014) The following income shall be exempt from tax from Assessment Year 2 .....

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pays interest referred to in section 10(23FC) to business trust. (6) TAX ON INCOME OF UNIT HOLDER AND BUSINESS TRUST SECTION:- 115UA Notwithstanding anything contained in any other provisions of this Act, any income distributed by a business trust to its unit holders shall be deemed to be of the same nature and in the same proportion in the hands of the unit holder as it had been received by, or accrued to, the business trust. Subject to the provisions of section 111A and section 112, the total .....

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st to a unit holder shall furnish a statement to the unit holder and the prescribed authority, within such time and in such form and manner as may be prescribed, giving the details of the nature of the income paid during the previous year and such other details as may be prescribed. (7) TAX DEDUCTION AT SOURCE SECTION:- 194LBA Where any distributed income referred to in section 115UA, being of the nature referred to in section 10(23FC), is payable by a business trust to its unit holder being a r .....

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ompany, the person responsible for making the payment shall at the time of credit of such payment to the account of the payee or at the time of payment thereof in cash or by the issue of cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 5%. (8) TAX ON INTEREST IN CASE OF NON-RESIDENTS & FOREIGN COMPANIES SECTION:- 115A Where a non-resident or foreign company being a unit holder of a business trust receives distributed income referred to in s .....

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structure bonds at any time during the period 1-7-2012 but before 1-7-2017 as approved by Central Government. Then, the interest payable by business trust to non-resident/ foreign company shall be taxable under section 115A @ 5% in the hands of non-resident / foreign company. Corresponding amendment is made in section 14LC where business trust shall deduct TDS @ 5% on such interest. (9) TAXATION OF CAPITAL GAINS ARISING TO UNIT HOLDER Long term capital gains on sale of units of business trust on .....

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T is paid is taxable in hands of unitholders @ 15% as per provisions of section 111A. However, such short term gains on sale of units of business trust shall not be taxable under section 111A but shall be taxable at normal tax rates in hands of the shareholders who were allotted units of business trust in exchange of shares in SPV. (10) CAPITAL GAINS ARISING TO SHAREHOLDERS OF SPV AT THE TIME OF EXCHANGE OF SHARES IN SPV FOR UNITS OF THE BUSINESS TRUSTS-TAXATYION DEFERRED TILL SALE OF UNITS In c .....

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r, for the purpose of computing capital gain, the cost of these units shall be considered as cost of the shares to the shareholders. The holding period of shares shall also be included in the holding period of such units. (11) PASS THROUGH TREATMENT FOR INTEREST RECEIVED BY BUSINESS TRUST FROM SPV The income by the way of interest received by the business, trust from SPV is accorded pass through treatment, i.e., there is no taxation of such interest in hands of the trust and no withholding tax a .....

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enefit of reduced rate of 5% tax on interest payments to non-resident lenders shall be available in section 194LC. The interest form External Commercial Borrowings shall be taxable @ 5% under section 115A in hands of non-resident and foreign company. (13) DIVIDEND RECEIVED BY THE BUSINESS TRUST The dividend received by the business trust shall be subject to dividend distribution tax at level of SPV but will be exempt in hands of business trust and the dividend component of the Income distributed .....

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f trust shall be taxable at the maximum marginal rate. [1] Explanation:- Business Trust means a trust registered as an infrastructure investment Trust or a Real Estate Investment Trust, in accordance with the regulations made under the Securities Exchange Board of India Act, 1992 [1] For the purposes of this clause, the expression special purpose vehicle means an Indian company in which the business trust holds controlling interest and any specific percentage of shareholding or interest, as may .....

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no capital gain on any transfer of a capital asset being the share of SPV to business trust in exchange of unit allotted by that trust to the transferor. Explanation for the purpose of this clause the meaning of SPV shall be as mentioned above and for the purpose of cost of acquisition in the hands of shareholder of SPV u/s 49(2AC). The asset shall be deemed to be the cost of acquisition to him of the share refer to in that clause. For the purpose of period of holding u/s 2(42A), For computing .....

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d fund or unit of a business trust and- PARTICULARS TAX PAYABLE BY THE ASSESSEE ON THE TOTAL INCOME SHALL BE THE AGGREGATE OF- The transaction of sale of such equity share or unit is entered into on or after 14.10.2004 (a)The amount of income-tax calculated on such short-term capital gains at the rate of fifteen per cent; and Such transaction is chargeable to securities transaction tax, (b)The amount of income-tax payable on the balance amount of the total income as if such balance amount were t .....

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ompany or A unit of an equity oriented fund or a unit of a business trust where- The transaction of sale of such equity share or unit is entered into on or after 1.10.2004 and Such transaction is chargeable to securities transaction tax. Provided further that the provisions of this clause shall not apply in respect of any income arising from transfer of units of a business trust which were acquired in consideration of a transfer referred to in clause (xvii) of section 47. (Proviso Added by Finan .....

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ished under section 139(1). As per Section 194A, no TDS shall be deducted when SPV pays interest referred to in section 10(23FC) to business trust. (6) TAX ON INCOME OF UNIT HOLDER AND BUSINESS TRUST SECTION:- 115UA Notwithstanding anything contained in any other provisions of this Act, any income distributed by a business trust to its unit holders shall be deemed to be of the same nature and in the same proportion in the hands of the unit holder as it had been received by, or accrued to, the bu .....

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sponsible for making payment of the income distributed on behalf of a business trust to a unit holder shall furnish a statement to the unit holder and the prescribed authority, within such time and in such form and manner as may be prescribed, giving the details of the nature of the income paid during the previous year and such other details as may be prescribed. (7) TAX DEDUCTION AT SOURCE SECTION:- 194LBA Where any distributed income referred to in section 115UA, being of the nature referred t .....

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ayable by a business trust to its unit holder, being a non-resident or a foreign company, the person responsible for making the payment shall at the time of credit of such payment to the account of the payee or at the time of payment thereof in cash or by the issue of cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 5%. (8) TAX ON INTEREST IN CASE OF NON-RESIDENTS & FOREIGN COMPANIES SECTION:- 115A Where a non-resident or foreign company be .....

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after 1-7-2012 but before 1-7-2017; or By issue of long term bonds including infrastructure bonds at any time during the period 1-7-2012 but before 1-7-2017 as approved by Central Government. Then, the interest payable by business trust to non-resident/ foreign company shall be taxable under section 115A @ 5% in the hands of non-resident / foreign company. Corresponding amendment is made in section 14LC where business trust shall deduct TDS @ 5% on such interest. (9) TAXATION OF CAPITAL GAINS AR .....

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