A comprehensive guide to REIT taxation

How are investments in REITs taxed in India?

With multiple REITs available now in India (Embassy, Mindspace, Brookfield), you really should understand the tax implications on investing in REITs.

This article covers the taxation from the point of view of an Individual investing in a REIT.

Here’s what’s covered:

• Distributions from REIT

• Taxation of Dividend

• Taxation of Interest

• Taxation of Amortization of Debt

• Capital gains

Distributions from REIT:

A REIT can distribute money to you in the following forms:

• Dividend

• Interest

• Amortization of debt

• Any combination of the above

The REIT will provide you a Form 64B at the end of the year. All you have to do is pick up these numbers and plug them into your ITR.

Taxation of Dividends:

Dividend from REIT will be exempt in most cases. As far as we know, this is the case for all 3 REITs in India.

Note: Dividend from REIT is taxed in 2 ways -

• If the SPVs from which the REIT receives dividends have not opted for the new concessional regime (under section 115BAA) on corporate tax, then your dividend from the REIT will be tax-free.
  

• If the SPVs from which the REIT receives dividends are paying a lower rate of corporate tax at 22% instead of the standard rate, then you will pay tax on dividend from the REIT at your income tax slab rate.

Taxation of Interest: Interest from REITs is taxed as income from other sources at slab rates.

Taxation of Amortization of Debt: This is not taxable at all. This is simply a return of money.

Capital Gains:

Period of holding to classify REIT units as Long Term Capital Asset – 36 Months

• Long-term capital gains exceeding INR 1 lakh on sale of units held for more than 36 months – 10% (plus applicable surcharge and cess)
  

• Short-term capital gains on sale of units held for up to 36 months – 15% (plus applicable surcharge and cess)

Need help figuring out REIT taxation? Feel free to contact us. Our team of experts is always happy to help!