Disclaimer: Education only, not investment, tax, legal or accounting advice. Nothing here recommends any security. Figures are as of the date shown at the end of the page.
Basics
1. What is an InvIT in one line?
A SEBI-registered trust that pools investors' money to own operating infrastructure through SPVs and passes most of the cash to unitholders. Part 1
2. How is an InvIT different from a REIT?
Same family of rules, different assets: REITs own rent-earning real estate; InvITs own infrastructure such as roads, power lines, pipelines and towers. REITs are classified as equity-related for mutual funds from 1 January 2026; InvITs remain hybrid (Vinod Kothari).
3. Is an InvIT like a mutual fund?
No. A mutual fund holds many traded securities and its NAV is marked daily. An InvIT owns a few large physical assets, valued periodically by a registered valuer.
4. Is the distribution guaranteed?
No. It depends on traffic, tariffs, costs, debt, regulation and tax.
5. Can a retail investor buy InvIT units?
Yes, units of public InvITs trade on stock exchanges through a demat account. The trading lot is one unit, and public issues have a minimum application of ₹10,000 to ₹15,000 (since 2021).
6. Why are they called "units", not shares?
Because a trust issues units of beneficial interest; a company issues shares.
Structure and SEBI rules
7. Who are the sponsor, trustee, investment manager and project manager?
Sponsor sets it up and keeps a minimum holding; trustee (a SEBI-registered debenture trustee) holds assets for unitholders; investment manager runs the trust; project manager runs the assets. Part 1
8. Why must InvITs distribute 90% of NDCF?
It is a regulatory requirement that makes InvITs income vehicles and supports pass-through tax design. Part 3
9. What is NDCF and how is it different from profit?
Net distributable cash flow is a cash measure after debt service, capex and required reserves, computed per SEBI's framework (effective 1 April 2024). Profit includes non-cash items like amortisation. Part 7
10. How much can an InvIT borrow?
Net borrowings up to 70% of asset value, with conditions above 25% and stricter ones above 49% (AAA rating, six continuous distributions, 75% unitholder approval). Part 3
11. Can an InvIT build new roads?
Public InvITs must keep at least 80% of value in completed, revenue-generating assets and can put up to 10% in under-construction projects.
12. Can the sponsor sell all its units?
No. Since August 2023 sponsors must hold a minimum for the InvIT's life on a sliding scale (15% for the first three years, then lower percentages or ₹500 crore, whichever is lower). Part 3
13. What is a private vs public InvIT?
Public InvITs raise money from the public and list; private InvITs place units with eligible investors and may or may not list.
14. Do unitholders have any say?
Yes: votes on leverage above 25%, large related-party deals, manager changes; holders of 10% or more can nominate a director to the investment manager's board.
15. How often are assets valued?
At least annually, with half-yearly updates for public InvITs, and quarterly for InvITs above 49% leverage under the 2019 rules.
Tax
16. What is "pass-through" taxation?
Income keeps its character (interest, dividend, etc.) as it passes from the SPV, through the InvIT, to you; it is exempt at trust level and taxed (or exempt) in your hands. Part 4
17. Is InvIT interest taxable?
Yes, at your applicable rate, with TDS at 10% for residents and 5% for non-residents.
18. Is InvIT dividend taxable?
From 1 April 2026 it is exempt for unitholders regardless of the SPV's tax regime, under the Taxation and Other Laws (Amendment) Act, 2026 (gazetted 17 August 2026). Part 4
19. What about "repayment of debt" in my distribution?
Up to the unit's issue price it is not taxed now but reduces your cost of acquisition; cumulative amounts above the issue price are taxed as income from other sources (Finance Act 2023).
20. How are capital gains on units taxed?
Listed units held over 12 months: 12.5% above ₹1.25 lakh; short-term 20%; rates effective 23 July 2024.
21. Why do section numbers in my notes differ from my statement?
The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 and renumbered sections (e.g. 115UA → 223; 194LBA → 393). Part 4
Toll roads and the industry
22. What is the difference between BOT, TOT and HAM?
BOT: private party builds, operates and collects toll. TOT: private party pays upfront to collect toll on an existing road. HAM: government pays 40% during construction and the rest as annuities with interest; no traffic risk for the developer. Part 5
23. Who sets toll rates on national highways?
Rates are set under the National Highways Fee (Determination of Rates and Collection) Rules, 2008 and revised every 1 April. Part 6
24. Why does toll go up every April?
The Rules link the annual revision to WPI, passing through 40% of the WPI rise, plus a fixed 3% a year (non-compounding) under rule 5(1).
25. Why do trucks pay much more than cars?
Heavier vehicles cause more pavement damage and take more road space; fee classes reflect this.
26. What is a concession period?
The number of years the private party may operate and collect toll before handing the road back.
27. What is major maintenance and why does it matter so much?
Periodic resurfacing and structural repair every few years. It is lumpy and can wipe out a year's free cash flow without a reserve (MMRA). Part 6
28. What is FASTag and GNSS tolling?
FASTag is RFID tolling at plazas. GNSS tolling charges by distance using satellite positioning; a 2024 amendment gives the first 20 km per day each way free for non-commercial (non-National Permit) vehicles using GNSS (News On AIR).
29. What happens if a competing road is built?
Under the March 2024 BOT MCA changes, NHAI cannot build a competing road before the 10th anniversary unless traffic exceeds 90% of design capacity; breach leads to compensation and concession extension (JSA).
30. What is a PCU?
Passenger Car Unit: a way to convert mixed traffic into equivalent cars for capacity planning (a truck counts as several PCUs).
31. Why does NHAI monetise roads?
To recycle capital from completed roads into new construction. ICRA reports ₹92,633 crore raised via TOT and InvITs up to FY2025 (ICRA).
Valuation and finance
32. Why isn't a 12% yield a 12% return?
Because toll concessions end; part of each payout returns your capital. ₹12 a year for 15 years on ₹100 is an IRR of about 8.4%. Part 7
33. Is there a terminal value in a toll road DCF?
Normally no, because the concession ends; only contractual extensions or hand-back receipts add value at the end.
34. What discount rate is used?
A risk-adjusted cost of equity or WACC; traffic-risk toll roads typically use higher rates than government-annuity HAM assets.
35. What is NAV and why do units trade away from it?
NAV is fair value of assets less liabilities per unit. The market may disagree with the valuer's assumptions or price in governance and growth.
36. What is DSCR and what level is "safe"?
Cash available for debt service ÷ debt service. Levels are deal-specific; toll roads need more cushion than annuity roads. Part 9
37. What is debt sculpting?
Setting repayments so DSCR stays at a target each period, matching debt to cash flow shape.
38. What is structural subordination at InvIT level?
InvIT lenders rank behind SPV-level creditors on SPV assets unless guarantees or security fix that.
39. How does an acquisition affect unitholders?
It can be accretive or dilutive to NDCF per unit depending on price, funding mix and asset quality.
Accounting
40. Does a toll road SPV show the road as a fixed asset?
Usually not. Under service concession accounting it shows an intangible (toll right) or a financial asset (HAM receivable). Part 8
41. Why is a HAM asset a financial asset?
Because the authority pays fixed amounts regardless of traffic, giving an unconditional right to cash.
42. How is the toll intangible amortised?
Generally over the concession on a pattern of consumption; revenue-based amortisation is allowed only under the Ind AS 101 D22 transition carve-out for pre-transition toll intangibles.
43. Why is there a provision for resurfacing?
Under the intangible model the contractual obligation to resurface is a present obligation provided for under Ind AS 37.
44. Are InvIT units equity or liability?
Units carry a distribution obligation that suggests a liability under Ind AS 32, but InvITs present unitholders' funds as equity, following SEBI's 2016 disclosure circulars (CIR/IMD/DF/114/2016 and CIR/IMD/DF/127/2016).
45. What extra statements do InvITs publish?
Statement of NDCF, statement of net assets at fair value and statement of total returns at fair value, alongside Ind AS statements, as required by SEBI's InvIT disclosure circulars.
Careers and students
46. Which skills matter for an InvIT finance role?
Project finance modelling, Ind AS (especially concessions, Ind AS 109 and 37), SEBI InvIT rules, tax pass-through, MIS and lender reporting, and clear communication with trustees and lenders.
47. What do Big 4 deal teams do on InvIT deals?
Financial and tax due diligence, model audit, valuation, accounting advisory on service concessions and acquisitions, and offer document support. Part 10
48. What should a CA student read first?
The InvIT Regulations, the latest Master Circular, the NDCF circulars, Appendix C to Ind AS 115, and one listed InvIT's annual report.
49. How can I practise?
Build a simple toll SPV model with this site's template and compare DSCR and IRR across scenarios. Part 12
50. Where can I check the latest rules?
SEBI's InvIT legal framework pages, the Income Tax Department's Act pages, and MoRTH's standard documents.
Previous: Part 12 · Start again: Part 1
Education only. This page is not investment, tax, legal or accounting advice, and it does not recommend buying, selling or holding any security. Laws and rules change: check the linked primary source and consult a qualified professional before acting.
Last reviewed 25 October 2026. Spotted an error? Tell us and we will correct it.