REITs get tax flexibility as Lok Sabha passes new Bill

The Story in Brief

The Lok Sabha on Thursday cleared the Taxation and Other Laws (Amendment) Bill, 2026, allowing Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InvIT) special purpose vehicles (SPVs) to opt for the concessional tax regime without losing the tax-exempt status of dividends paid to unitholders. Currently, the dividend exemption applies only when the SPV is under the old tax regime. The new provision, if enacted, would also let SPVs use accumulated Minimum Alternate Tax (MAT) credits. CFO at Embassy REIT, cited by CFO.Economic Times, said the change could restore economic value of around Rs 592 crore in MAT credits previously written off.

Investors in higher tax brackets stand to benefit. For example, a 30% slab investor receiving Rs 75,000 as dividend from a REIT SPV on the new regime currently pays about Rs 23,400 in tax, which would fall to zero. However, the exemption covers only the dividend component; interest, rental income, and capital gains remain taxable at applicable rates. The Bill now requires Rajya Sabha approval and the President's assent before taking effect.