Quick Summary
Finance (No.2) Act, 2014 introduced a special taxation regime for Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InVIT) [commonly referred to as business trusts]. The special regime was introduced in order to address the challenges of financing and investment in infrastructure. The business trusts invest in special purpose vehicles (SPV) through equity or debt instruments. 2. Keeping in mind the business structure, the special taxation regime under section 115UA of t
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FAQ :
The main change is to introduce taxation on certain distributions made by business trusts to their unit holders, specifically those that were previously not taxed in the hands of either the trust or the unit holder, such as purported debt repayments.
The changes affect Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InVITs), which are commonly referred to as business trusts.
These amendments will take effect from 1st April 2024 and will apply to the assessment year 2024-25 and subsequent assessment years.
Distributions shown as repayment of debt by the business trust to its unit holders were not being taxed in the hands of either the business trust or the unit holder.
Sums received by a unit holder from a business trust that are not of an exempt nature and are not already taxed will now be considered taxable income, unless the sum received is for the redemption of units and is reduced by the acquisition cost.
The special taxation regime was introduced to address challenges in financing and investment in infrastructure, providing a pass-through status for certain incomes like interest, dividend, and rental income.
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