A Real Estate Investment Trust or REIT is a fund made out of investments of various investors, which is further invested in real estate assets like SEZs, convention centres, hospitals, car parks, warehouses, hotels, and buildings.
The dividends and interest received by the REIT from the Special Purpose Vehicles (SPVs are formed to raise funds from the market) are exempt from tax. The REIT is also exempt from tax on its rental income, which it may have earned if it bought the premise directly.
REIT Rental income is exempt in SPVs hands, but taxable in the investors’ hands.
The tax is applicable to the REIT investor regarding the cash flow part. That is the income from the rent of REIT (exempted for the REIT) and income from the interest of the REIT by the Special Purpose Vehicles,
company which is formed to undertake a specific business purpose or activity and are commonly utilized in certain structured finance applications, such as asset securitization, joint ventures, property deals, etc
(Special Purpose Vehicles exempted from that as well). In case, the Special Purpose Vehicles go for a discounted rate on income tax, the tax applicability on the cash flow dividends as well as the rest of all the cash flow received is entitled to be exempted from tax.
As REITs are listed, in case an investor sells it after three years, the gains will be considered as long-term gains and will be taxed at 10% (above Rs. 1 lac) (without indexation), while short-term gains (before three years) will be taxed at the rate of 15%.
Read more:
What is a REIT fund?
How to invest in REIT in India?
Authors Of The Question
How can I save Income Tax by investing with REIT
SIDDHARTHA CHATTOPADHYAY
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2021-11-05T12:12:17+00:00 2021-11-18T18:44:24+00:00Comment
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