Good news for investors: No income tax on dividends received from REITs and InvITs in this case, Lok Sabha passes the bill; Check the details - The Economic Times

The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026 on August 6, 2026. While there are many income tax amendments relating to corporations and foreign institutions, one tax law amendment relates to REIT/InvIT trusts which indirectly helps investors. This Bill will need to be passed by the Rajya Sabha and receive the President’s assent before coming into force.This article explains how this helps REIT and InvIT investors.If a REIT, InvIT opts for the new tax regime then what does this amendment mean for its unitholders?The Bill amends the taxation framework applicable to Business Trusts by extending dividend tax exemption to unit holders while correspondingly increasing the surcharge on Special Purpose Vehicles (SPVs).Chartered Accountant Suresh Surana explains that this says that if a Real Estate Investment Trust (REIT) / Infrastructure Investment Trust (InvIT) [through its underlying Special Purpose Vehicle (SPV)] opts for the concessional (new) tax regime, this amendment is favourable for its unitholders.Before you continue readingHow financially free are you?Most people overestimate their financial freedom. Discover your Financial Freedom score through a quick surveySurana says: “The amendment provides the exemption of dividend income in the hands of REIT/InvIT unitholders in respect of dividends distributed by an SPV that has opted for the concessional tax regime.”According to Surana, prior to this amendment, where an SPV opted for the concessional tax regime under Section 200 or 201 of the Income Tax Act, 2025 (corresponding to section 115BAA or 115BAB of the Income Tax Act, 1961), the dividend distributed by such SPV and passed through the REIT/InvIT lost its tax-exempt character and became taxable in the hands of the unitholders.Also read: Nexus Select Trust posts 11% increase in net operating income to Rs 510 croreWhat is the catch?SPV of a REIT or InvIT can opt for the new tax regime but this means they need to pay a 25% surcharge, whereas the surcharge rate is 10% under the old tax regime. However, the amendment says that if the SPV opts for the new tax regime, its dividend is tax exempt for unitholders. So this decision is not so easy to take and will need careful evaluation by the respective REIT and InvIT.Surana says: “While the recent amendment enhances the attractiveness of the concessional regime by exempting dividends in the hands of unit holders, the corresponding increase in surcharge at the SPV level means that the optimal choice will depend on the facts and financial profile of each structure rather than a uniform rule.The surcharge rates: