Tax on income from securitisation trusts
[Section-221 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 221(1) of Income Tax Act 2025
221(1) Irrespective of anything contained in this Act, where a person being an investor of a securitisation trust, receives any income or any income accrues or arises to him, out of investments made in the securitisation trust, such income shall be chargeable to income-tax in the same manner as if, it were the income accruing or arising to, or received by, such person, had the investments by the securitisation trust been made directly by him.
Section 221(2) of Income Tax Act 2025
221(2) The income paid or credited by the securitisation trust shall be deemed to be of the same nature and in the same proportion in the hands of the person referred to in sub-section (1), as if it had been received by, or had accrued or arisen to, the securitisation trust during the tax year.
Section 221(3) of Income Tax Act 2025
221(3) The income accruing or arising to, or received by, the securitisation trust during a tax year, if not paid or credited to the person referred to in sub-section (1), shall be deemed to have been credited to the account of the said person––
- (a) on the last day of the tax year; and
- (b) in the same proportion in which such person would have been entitled to receive the income had it been paid in the tax year.
Section 221(4) of Income Tax Act 2025
221(4) The person responsible for crediting or making payment of the income on behalf of securitisation trust, and the securitisation trust, shall furnish, within such period, as prescribed, to the person who is liable to tax in respect of such income and to the prescribed income-tax authority, a statement in such form and verified in such manner, giving details of the nature of the income paid or credited during the tax year and such other relevant details, as prescribed.
Section 221(5) of Income Tax Act 2025
221(5) Any income which has been included in the total income of the person referred to in sub-section (1) in a tax year, on account of it having accrued or arisen in the said tax year, shall not be included in the total income of such person in the tax year in which such income is actually paid to him by the securitisation trust.
Section 221(6) of Income Tax Act 2025
221(6) In this section,—
- 221(6)(a) “investor” means a person who is holder of any securitised debt instrument or securities or security receipt issued by the securitisation trust;
- 221(6)(b) “securities” means debt securities issued by a Special Purpose Vehicle as referred to in the guidelines on securitisation of standard assets issued by the Reserve Bank of India;
- 221(6)(c) “securitised debt instrument” shall have the same meaning as assigned to it in regulation 2(1)(s) of the Securities and Exchange Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 made under the Securities and Exchange Board of India Act, 1992 and the Securities Contracts (Regulation) Act, 1956;
- 221(6)(d) “securitisation trust” means a trust, being a—
- (i) “special purpose distinct entity” as defined in regulation 2(1)(u) of the Securities and Exchange Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 made under the Securities and Exchange Board of India Act, 1992 and the Securities Contracts (Regulation) Act, 1956 and regulated under the said regulations; or
- (ii) “Special Purpose Vehicle” as defined in, and regulated by, the guidelines on securitisation of standard assets issued by the Reserve Bank of India; or
- (iii) trust set-up by a securitisation company or a reconstruction company formed, for the purposes of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or in pursuance of any guidelines or directions issued for the said purposes by the Reserve Bank of India,
- which fulfils such conditions, as prescribed;
- 221(6)(e) “security receipt” shall have the same meaning as assigned to it in section 2(1)(zg) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
FAQs on Section 221 of Income Tax Act 2025
What is the tax treatment of income received by an investor from a securitisation trust?
Such income is taxed in the hands of the investor as if the investments were made directly by them, and not by the securitisation trust.
How is the nature and proportion of income determined for the investor?
The income paid or credited by the trust is treated as having the same nature and proportion in the investor’s hands as if the trust had received it.
What happens if the income is not actually paid or credited to the investor during the tax year?
It is deemed to have been credited to the investor on the last day of the tax year in the proportion they would have received it if it had been distributed.
Is the investor taxed twice if the income is first deemed and later actually paid?
No, income that has already been taxed in a prior year on a deemed accrual basis will not be taxed again when it is actually paid to the investor.
Who is responsible for reporting the income distribution?
The person responsible for crediting or paying the income on behalf of the securitisation trust, and the trust itself, must furnish a prescribed statement to the investor and to the income-tax authority.
What details must be included in the statement furnished by the trust?
The statement must include the nature of the income paid or credited during the tax year and other prescribed details, in a prescribed form and manner.
Who is considered an investor under this section?
An investor is a person holding securitised debt instruments, securities, or security receipts issued by the securitisation trust.
What qualifies as a ‘securitisation trust’ under this provision?
It includes a special purpose distinct entity or vehicle regulated by SEBI or RBI, or a trust set up under SARFAESI Act by a securitisation or reconstruction company, subject to prescribed conditions.
What is the meaning of ‘securitised debt instrument’?
It has the meaning assigned in SEBI’s 2008 Regulations for public offer and listing of such instruments.
What is a ‘security receipt’?
It is as defined in section 2(1)(zg) of the SARFAESI Act, 2002.
Are investors required to take any specific action for tax compliance?
Investors must include deemed or actual income in their total income for the relevant tax year and rely on the statement provided by the trust for accurate reporting.
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