Section 115TCA of ITA, 1961 : Section 115Tca: Tax On Income From Securitization Trusts

Explanation using Example

Imagine Jane is an investor who has purchased securities from a securitisation trust. The trust invests in various financial assets and distributes the income generated from these assets to its investors, including Jane. According to Section 115TCA of the Income-tax Act, 1961, the income Jane receives from the trust should be taxed as if she had earned that income directly from the underlying assets, not as income from the trust.

For instance, if the securitisation trust earns interest from the assets it holds and then passes that interest on to Jane, she will be taxed on the interest income as though she had earned the interest herself. If the trust does not distribute the income but retains it, it is deemed that Jane has been credited with her share of the income on the last day of the financial year, and she will be taxed accordingly.

The trust is also required to provide Jane and the tax authorities with a statement detailing the nature and amount of income credited or paid to her during the year.

If Jane was taxed on income that was accrued but not paid in a previous year, she will not be taxed again on the same income when it is actually paid to her in a subsequent year, avoiding double taxation.