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TAXATION OF BUSINESS TRUST AND UNIT HOLDERS (INTRODUCED BY FINANCE ACT 2014)

Income Tax - Tax Liability in special Circumstances / Specific Cases - 22 - As per Finance Act 2014, the income of a business trust and unit holders required to be taxed. As per section 10(23)FC, any income of a business trust [i]by way of interest received or receivable from special purpose vehicle [ii](SPV) shall be exempt from tax. [i] Explanation:- Business Trust means a trust registered as an infrastructure investment Trust or a Real Estate Investment Trust, in accordance with the regulatio .....

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t proportion of the income which is of the same nature as the income refer to section 10(23FC) shall be exempt from the tax. (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 .....

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period for which the share or shares were held by the assessee. Where the total income of an assessee includes any income chargeable under the head Capital gains arising from the transfer of short-term capital asset, being an equity share in a company or a unit of an equity oriented 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 14.10.200 .....

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consideration of a transfer as referred to in clause (xvii) of section 47. (4) EXEMPTION IN RESPECT OF LONG TERM CAPITAL GAINS U/S 10(38)IN RESPECT OF SPECIFIED SECURITIES SECTION:- 10(38) Any income arising from The transfer of a long-term capital asset Being an equity share in a Company 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 securit .....

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furnish return of income (ROI) or loss under any other provisions of this section, shall furnish the return of its income in respect of its income or loss in every previous year and all the provisions of this Act shall, so far as may be, apply if it were a return required to be furnished 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 N .....

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art thereof, received by a unit holder from the business trust is of the nature as referred to in section 10(23FC), 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. Any person responsible 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 ma .....

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e time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent. Where any distributed income referred to in section 115UA, being of the nature referred to section 10(23FC), is payable 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 .....

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on-resident/foreign company shall be liable to pay tax @ 5% on such interest income. [Corresponding TDS provisions are there in section 194LBA]. Where a business trust borrows money in foreign currency from a non-resident or foreign company: Under a loan agreement at any time on or 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 payabl .....

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f 10(38) in hands of shareholders who were allotted units of business trust in exchange of shares in the SPV. Such long term capital gains are chargeable on the sale of units of business trust in hands of shareholders. Such indexation under second provision to section 48 is available. Short term capital gains on sale of units of business trust on sale of which STT is paid is taxable in hands of unitholders @ 15% as per provisions of section 111A. However, such short term gains on sale of units o .....

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ation of gains shall be deferred and taxed at the time of disposal of units by the shareholders. The capital gains shall be exempt in the hands of the shareholders under section 47(xvii) when they transfer shares in SPV to business trust in exchange of units of business trust. Capital gain will arise when the shareholders sells the units of business trust. Further, for the purpose of computing capital gain, the cost of these units shall be considered as cost of the shares to the shareholders. Th .....

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income distributed to non-resident unit holders and, at the rate of 10% in respect of payment of interest component of distributed income to a resident holder shall be effected by the business trust. (12) WITHHOLDING TAX OF 5% ON INTEREST PAID BY BUSINESS TRUST ON EXTERNAL COMMERCIAL BORROWING In case of external commercial borrowings by the business trust, the benefit of reduced rate of 5% tax on interest payments to non-resident lenders shall be available in section 194LC. The interest form Ex .....

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SINESS TRUST The income by way of long term capital gains on disposal of assets by the trust shall be taxable in the hands of the trust at the applicable rate under section 112. However, if such capital gains are distributed, then the component of distributed income attributable to capital gains would be exempt in the hands of the unit holders. Any other income of trust shall be taxable at the maximum marginal rate. [1] Explanation:- Business Trust means a trust registered as an infrastructure i .....

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r to section 115UA received by a unit holder from the business trust not being that proportion of the income which is of the same nature as the income refer to section 10(23FC) shall be exempt from the tax. (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 .....

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shares as referred to in clause (xvii) of section 47, there shall be included the period for which the share or shares were held by the assessee. Where the total income of an assessee includes any income chargeable under the head Capital gains arising from the transfer of short-term capital asset, being an equity share in a company or a unit of an equity oriented fund or unit of a business trust and- PARTICULARS TAX PAYABLE BY THE ASSESSEE ON THE TOTAL INCOME SHALL BE THE AGGREGATE OF- The tran .....

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from transfer of units of a business trust which were acquired by the assessee in consideration of a transfer as referred to in clause (xvii) of section 47. (4) EXEMPTION IN RESPECT OF LONG TERM CAPITAL GAINS U/S 10(38)IN RESPECT OF SPECIFIED SECURITIES SECTION:- 10(38) Any income arising from The transfer of a long-term capital asset Being an equity share in a Company 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 i .....

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N:- 139(4E) As per section 139(4E) every business trust, which is not required to furnish return of income (ROI) or loss under any other provisions of this section, shall furnish the return of its income in respect of its income or loss in every previous year and all the provisions of this Act shall, so far as may be, apply if it were a return required to be furnished under section 139(1). As per Section 194A, no TDS shall be deducted when SPV pays interest referred to in section 10(23FC) to bus .....

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t the maximum marginal rate. If 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 section 10(23FC), 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. Any person responsible for making payment of the income distributed on behalf of a business trust to a unit holder shall furnish a statement to the .....

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t 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 a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent. Where any distributed income referred to in section 115UA, being of the nature referred to section 10(23FC), is payable by a business trust to its unit holder, being a non-resident or a foreign company, the person responsible for making the payment .....

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ed income comprises of interest income referred to in section 10(23FC), then the non-resident/foreign company shall be liable to pay tax @ 5% on such interest income. [Corresponding TDS provisions are there in section 194LBA]. Where a business trust borrows money in foreign currency from a non-resident or foreign company: Under a loan agreement at any time on or 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 1-7-201 .....

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holders under section 10(38). However, such long term gains shall not be exempt of 10(38) in hands of shareholders who were allotted units of business trust in exchange of shares in the SPV. Such long term capital gains are chargeable on the sale of units of business trust in hands of shareholders. Such indexation under second provision to section 48 is available. Short term capital gains on sale of units of business trust on sale of which STT is paid is taxable in hands of unitholders @ 15% as .....

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