Section 10(23DA) of the Income Tax Act provides a tax exemption for income earned by a securitisation trust from the activity of securitisation.
Key Features:
- Eligible Entity: A securitisation trust as defined under the Explanation to Section 115TC.
- Nature of Exemption: Any income arising from the activity of securitisation is fully exempt from income tax.
- Definition of Securitisation: As per the Explanation, it includes meanings assigned under:
- SEBI’s 2008 Regulations on Securitised Debt Instruments,
- The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, or
- RBI’s guidelines on securitisation of standard assets2.
Example:
Suppose SecureTrust SPV, a securitisation trust, pools together home loan receivables from a bank and issues Pass-Through Certificates (PTCs) to investors. It earns ₹20 crore in a year from interest collections and servicing fees.
Since this income arises from the activity of securitisation, it is fully exempt under Section 10(23DA).
Additionally, as per CBDT Notification No. 46/2016, no TDS is required on payments made to such securitisation trusts under this clause.
