Infrastructure Investment Trusts (InvITs)

An InvIT is a trust. It collects money from many investors. It uses that money to own infrastructure that already earns income. Think of toll roads and power transmission lines.

Investors hold units in the trust. A unit works a little like a share. The trust earns income from its assets and passes most of it to unit holders.

How is an InvIT different from a REIT?

A REIT does the same job for rent-earning real estate. An InvIT does it for infrastructure. SEBI treats both as trust-based vehicles that make large real assets open to ordinary investors.

What are public and private InvITs?

A public InvIT raises money through a public offer. A private InvIT raises money from select investors. The rules differ for each kind, and the cards below say which one a rule covers.

SEBI notified its InvIT Regulations in 2014. They carry the full title SEBI (Infrastructure Investment Trusts) Regulations, 2014. They set out who may sponsor a trust, how it is run and what it must tell investors.

Which InvIT was first on the stock exchange?

IRB InvIT Fund listed on 18 May 2017. It listed at Rs 103.25 on the BSE against an issue price of Rs 102. Business Standard called it India’s first infrastructure trust to list. Its assets are toll roads.

The SEBI listing table also shows 18 May 2017 as the listing date.

An InvIT is not one company. Several parties share the work. SEBI calls them the parties to the InvIT.

• Sponsor: the promoter that sets the trust up.
• Investment manager: makes the investment decisions.
• Trustee: oversees the manager and protects unit holders.
• Project manager: carries out the project work where one is needed.

What must a sponsor be worth?

Each sponsor needs a net worth of at least Rs 100 crore if it is a company. An LLP needs net tangible assets of at least Rs 100 crore. The investment manager has a lower bar. It needs a net worth of Rs 10 crore.

A sponsor cannot launch the trust and walk away. The rules keep its money in.

• Sponsors together must hold at least 15% of the units for three years from listing.
• From the fourth year to the end of the fifth, they must hold at least 5%.
• From the sixth year to the end of the tenth, they must hold at least 3%.

Why does SEBI insist on this?

A sponsor with units at stake has a reason to keep the trust healthy. Investors can then trust that the people who built it still share the risk.

SEBI wants an InvIT to behave like an income vehicle. So it forces most of the cash out to unit holders.

• An InvIT must distribute at least 90% of its net distributable cash flows.
• A public InvIT must make a distribution at least once every six months.
• A private InvIT must make one at least once a year.
• A declared payout must reach investors within fifteen days.

What does this rule cost the trust?

The trust keeps little cash for itself. To grow, it usually has to raise fresh money. It cannot rely only on reinvested profit.

A public InvIT must stay mostly in finished, income-earning projects. SEBI does this to keep it a low-risk income vehicle.

• At least 80% of its asset value must sit in completed, revenue-generating infrastructure projects.
• Up to 20% may go into other permitted assets, such as under-construction projects.
• Under-construction exposure is capped at 10% of asset value.

What changed for private InvITs?

SEBI’s 2026 report says private InvITs may now put up to 10% of asset value into greenfield projects. That matches the limit for public InvITs.

InvITs borrow money. Lenders want a fast way to recover dues if a trust defaults. The SARFAESI Act of 2002 gives secured lenders that route.

The Finance Act 2021 changed the Act’s definition of a borrower. Section 162 added “a pooled investment vehicle” to it. The change took effect on 1 April 2021.

Does an InvIT count as a pooled investment vehicle?

The Securities Contracts (Regulation) Act defines that term. It names a business trust as defined in the Income-tax Act. The Finance Act 2021 itself treats an InvIT as such a trust. So InvITs fall inside the new borrower definition.

This is the reason UPSC called Statement II in its 2023 question correct.

The Income-tax Act treats an InvIT as a business trust. Section 115UA keeps the nature of the income the same when the trust passes it on. Interest stays interest. Dividend stays dividend.

• Interest income: the unit holder pays tax on it. Section 115UA says so for income covered by clause 23FC(a).
• Dividend income: section 115UA does not list it, so the unit holder is not taxed on it in this way.
• Tax deducted at source: under section 194LBA, the trust deducts 10% from a resident holder’s interest and similar income.
• Dividend and TDS: there is no TDS on dividend if the SPV has not opted for the lower corporate tax rate under section 115BAA.

How does this compare with the old UPSC statement?

The old statement said interest is exempt and dividend is taxable. It has the two the wrong way round. Card 9 shows how that decided the UPSC answer.

UPSC CSP 2023, GS Paper I, gave two statements. Statement I said interest income distributed by an InvIT is exempt, but dividend is taxable. Statement II said InvITs are recognised as borrowers under the SARFAESI Act, 2002.

Which statement was wrong?

Statement I is incorrect. Card 8 shows why. Interest is taxed in the hands of the unit holder. Dividend is the part that is not.

Statement II is correct. Card 7 shows why. Section 162 of the Finance Act 2021 brought pooled investment vehicles into the definition of a borrower.

The official answer key gives option D. That option reads: Statement I is incorrect but Statement II is correct.

What went wrong on earlier versions of this page?

They said both statements were correct. They also said a 2023 Budget change had ended the interest exemption. We could not confirm that change, and the key contradicts it.

SEBI’s report for 2025-26 lists several changes for InvITs.

• A December 2025 notification widened the meaning of a strategic investor.
• REITs are treated as equity for mutual fund investment from 1 January 2026. That leaves the existing investment limit for REITs and InvITs open only to InvITs.
• An InvIT may keep an SPV after its concession ends. It must exit or buy a new project within one year.
• InvITs with leverage above 49% may use fresh borrowings for more purposes.

Why do these changes matter for exams?

They show the regulator tuning the product, not rewriting it. The core rules in cards 4 to 6 still stand.