An Infrastructure Investment Trust (InvIT) is a mutual fund-like investment vehicle that pools money from individual and institutional investors and invests it in infrastructure assets or projects.

While mutual funds generally invest in financial securities such as shares and bonds, InvITs primarily provide exposure to physical infrastructure assets such as roads, power transmission networks and other infrastructure projects. Revenue is generated through tolls, tariffs, usage charges etc.The income generated by these assets is distributed to InvIT unit holders, primarily through interest, dividends and other permitted distributions.

Simple Understanding

Investors → Pool money in InvIT → Investment in infrastructure assets → Assets generate income → Returns distributed to unit holders

Structure of InvITs

An InvIT is structured around four key entities:

Entity	Role
Trustee	Oversees the activities of the Investment Manager and Project Manager and is registered with SEBI as a debenture trustee.
Sponsor	Responsible for setting up the InvIT and transferring the initial portfolio of infrastructure assets to it.
Investment Manager	Responsible for the overall and day-to-day management of the InvIT, including its investment activities.
Project Manager	Responsible for the execution, operation and management of the infrastructure projects/assets held by the InvIT.

Features of InvITs

Legal Structure: InvITs are set up as trusts and registered with SEBI.
The InvIT is designed as a tiered structure with Sponsor setting up the InvIT which in turn invests into the eligible infrastructure projects either directly or via special purpose vehicles (SPVs).
Regulation: InvITs are regulated under the SEBI (Infrastructure Investment Trusts) Regulations, 2014.
Mandatory Distribution: InvITs are required to distribute at least 90% of their Net Distributable Cash Flows (NDCF) to investors.
80% Investment Requirement: At least 80% of InvIT assets must be invested in completed and income-generating infrastructure projects.
Remaining 20%: The remaining 20% can be invested in:
- Under-construction infrastructure projects
- Listed/unlisted debt of infrastructure companies
- Equity of listed companies deriving at least 80% of their income from the infrastructure sector
- Government securities
- Money market instruments
- Liquid mutual funds
- Cash equivalents
Infrastructure Investment Trusts (InvITs) are officially recognized as borrowers under the SARFAESI Act, 2002 (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act). This designation was enabled via an amendment through the Finance Act, 2021, which brought pooled investment vehicles under the law’s coverage

How do Investors Earn?

Returns from InvITs are typically generated through periodic distributions, such as dividends, interest and debt repayments, as well as potential capital gains when InvIT units are sold at a price higher than their purchase price.

Taxation of InvITs

Interest Income: Taxable at the applicable income-tax slab/rate of the unit holder.
Capital Gains: Capital gains arising from the sale of InvIT units are taxable in the hands of the unit holder.
Dividend Income:Dividend income distributed by InvITs is exempt in the hands of unit holders, irrespective of the tax regime opted for by the underlying SPV.(This exemption was enacted by The Taxation and Other Laws (Amendment) Act, 2026, which omitted the restrictive clauses under Schedule V of the Income-tax Act, 2025, to make the unit holder’s dividend exemption independent of the underlying SPV’s tax regime.)

Advantages of InvITs

Low Ticket Size: Enables investors to participate in large infrastructure assets without directly financing or owning such projects.
Liquidity: Units of publicly listed InvITs can be traded on stock exchanges, providing an exit route to investors.
Transparency: Periodic disclosures, asset valuations and reporting requirements improve visibility regarding investments and performance.
Regulated Investment: InvITs operate under the regulatory framework prescribed by SEBI.
Regular Income: The requirement to distribute a substantial portion of NDCF can provide periodic returns to unit holders.
Infrastructure Financing: Mobilises private/institutional capital into infrastructure and helps developers monetise operational assets and recycle capital into new projects.

FAQs

1. What is an Infrastructure Investment Trust (InvIT)?

An InvIT is an investment vehicle that pools funds from investors and invests them in infrastructure assets or projects, such as roads and power transmission networks.

2. Who regulates InvITs in India?

InvITs are regulated by the Securities and Exchange Board of India (SEBI)

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