The For Real Estate Investment Trust

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In the Finance Act, 2014, the Government of India granted various tax exemptions to such REITs, showing a clear intention of making these entities a notified one, even before SEBI regulations were notified. It granted a status of tax pass-through entity to these trust. This was also reflected in The Union Budget of 2014 to make REITs tax-efficient for domestic and foreign investors. The tax pass-through status refers to the fact that the returns from investments made in these investment vehicles, will only be taxed in the hands of investors, and the REITs will not have to pay any taxes on incomes. For the first time clear cut provisions have been mentioned in the Finance Act to provide for complete new taxation regime for Real Estate…show more content…
Henceforth, the Finance No. (2) Act, 2014 has altered the Income tax Act to set up a particular taxing administration for giving the way the income in the hands of such trusts is to be saddled and the taxability of the wage appropriated by such business confides in the hands of the unit holders of such trusts. (iii) A return of income has to be furnished by the business trust. (iv) There are various forms that has to be filed and other compliances that are to be met with for the proper implementation of the said scheme. It is expected that in due course the Government will come up to describe reporting requirement and other details etc. Tax implications on various parties involved in a REIT-transaction: For Business Trust: The SEBI regulations allow the holding of properties by REITs via two methods- by themselves or through SPVs, where the REIT will have a controlling interest of at least 51% by way of holding the share capital of the said SPV. Thus, in the latter method, the trust will get a dividend income from the SPV which will be exempt from tax in its hand. The other source of income will be by way of interest on loans provided to the SPVs by REITs. Such an interest is exempted from tax as per Section 10 (23FC) of the Income Tax Act, 1961, in the hands of the trust; No tax at source is required to be deducted by the SPV at the time of making payment to the trust,
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