Infrastructure Investment Trusts (InvITs) are a new investment option that are available to the investors. InvITs are currently not retail products as the minimum primary application amount is Rs 10 lakh and the minimum secondary transaction amount is Rs 5 lakh, but once the market matures, the product may become available for retail investors.
An InvIT is a pool of fund for investment in infrastructure projects and the earnings are distributed among the unitholders. The Trust issues units to the investors and the units are listed on the stock exchange. InvIT invests in special purpose vehicles (SPVs) formed for execution of infrastructure projects. The SPVs are not valued everyday but once in six months, hence InvITs too are valued every six months.
An InvIT can invest in infrastructure projects or a company having at least 90% of assets comprising of infrastructure projects. The infrastructure projects InvITs can invest include roads, bridges, ports, airports, metros, generation and transmission of electricity, telecom, oil pipelines, irrigation, among others.
InvITs offer excellent investment option due to the government’s push to infrastructure projects in the country. The return on investments in InvITs can be expected to be higher on account of the growth in economy, which will propel infrastructure growth in the country.
If an InvIT distributes income in the form of interest to the unitholder, it attracts withholding tax at the rate of 10% for resident unitholders. However, the dividend income is exempt in the hands of the unitholder as it does not attract dividend distribution tax.