With the amendments to the Finance Bill 2020 which caters to dividend exemption earned by unitholders of real estate investment trusts (REITs) and infrastructure investment trusts (InVITs) from tax, will revive the market for these instruments.
As per the Union Budget announced in Feb, unitholders had to pay tax on dividend income distributed by REITs/InvITs.
According to PwC – “The decision to continue with a single-level levy of income tax on InvITs and REITs welcome and will send a positive message to investors on consistency in Indian tax laws. This will further reduce pressure on the banking system by making available fresh equity, attract foreign funds and make it much more attractive to investors”.
As per EY- “Reintroduction of the dividend tax exemption, albeit subject to conditions, coupled with income tax exemption given to sovereign wealth funds and pension funds for investments made by them in InvITs, are welcome steps. It should revive the REIT/InvIT market and attract long-term patient capital into the country.”
With the coronavirus outbreak looming large on all industries, including the already suffering real estate sector, these are difficult times. With this Amendment, the government hopes that both the Issuers and Investors will go for REIT and InvIT issuances.