Residual income from REITs and InvITs now covered under section 56 of Income-tax Act.
– Kaushal Shah, Executive | kaushal@vinodkothari.com
Background
Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are two of the most important investments in the real estate and infrastructure sectors. REITs provide investors with a way to invest in real estate without having to own physical assets, while InvITs allow investors to invest in infrastructure projects without taking on the risk associated with owning physical assets. Both REITs and InvITs offer investors an opportunity for diversification, income generation, and capital appreciation and also provide them with the option of liquidity. As per recent trends, they are becoming increasingly popular among both institutional and retail investors looking to diversify their portfolios.
One of the key aspects which make REITs & InvITs is the tax transparency they provide owing to their structure. The ‘pass-through’ status means that the income generated would be taxed in the hands of the unit holders, and that the business trust will not be liable to pay any tax on the same.
As per the extant provisions the taxation of REITs as a business trust shall be as per the following:
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