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Ramalingam Kalirajan |6266 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Apr 30, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by SANJAY on Nov 17, 2023Hindi

SIR, GOOD DAY. I WOULD LIKE TO INVEST IN REITs. PL ENLIGHTEN ABOUT VARIOUS REITs IN INDIA AND TAXATION ASPECTS THERE TO. THANKS AND REGARDS

Ans: Real Estate Investment Trusts (REITs) are an increasingly popular investment option in India, offering opportunities to invest in income-generating real estate assets. Here's an overview of REITs in India and their taxation aspects:

Types of REITs: In India, there are primarily two types of REITs: Equity REITs and Mortgage REITs. Equity REITs own and operate income-generating real estate properties, while Mortgage REITs provide financing for real estate investments.
Listed REITs: Currently, there are a few listed REITs in India, including Embassy Office Parks REIT and Mindspace Business Parks REIT. These REITs own commercial properties such as office spaces and lease them out to tenants, generating rental income for investors.
Taxation Aspects:
Dividend Distribution Tax (DDT): REITs are required to distribute at least 90% of their net distributable income to investors as dividends. This income is exempt from DDT at the REIT level.
Taxation at Investor Level: Dividends received from REITs are taxable in the hands of investors as per their applicable income tax slab rates.
Capital Gains Tax: Any capital gains arising from the sale of REIT units are taxed as per the capital gains tax regime. If units are held for more than 3 years, they qualify for long-term capital gains tax with indexation benefits. Otherwise, they are subject to short-term capital gains tax as per the investor's income tax slab rates.
Tax Deductions: Investors can also avail tax deductions under Section 80C of the Income Tax Act for investments made in REIT units, subject to certain conditions.
Risks and Considerations: While REITs offer the potential for regular income and capital appreciation, investors should be mindful of risks such as fluctuations in real estate prices, tenant occupancy, and interest rate changes.
Before investing in REITs, it's essential to conduct thorough research, assess your risk tolerance, and consult with a Certified Financial Planner or tax advisor to understand the taxation implications and suitability of REIT investments based on your financial goals and circumstances.

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