REIT and InvIT explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are SEBI-regulated investment vehicles that allow retail investors to participate in income-generating real estate and infrastructure assets. They offer regular income distributions and are listed on stock exchanges.
Structure Overview
Both REITs and InvITs operate through a trust structure:
- Trust: The REIT/InvIT entity registered with SEBI
- Manager: Professional entity managing trust assets
- Trustee: SEBI-registered trustee (bank or trust company)
- Special Purpose Vehicles (SPVs): Companies holding the underlying assets (properties/infrastructure)
- Unit Holders: Investors who hold trust units traded on exchanges
REIT vs InvIT
| Feature | REIT | InvIT |
|---|---|---|
| Assets | Commercial real estate (offices, malls, warehouses) | Infrastructure (roads, power plants, pipelines, telecom) |
| Minimum distribution | 90% of net distributable cash flow | 90% of net distributable cash flow |
| Asset size | Rs.500 crore minimum | Rs.500 crore minimum |
| Leverage | Up to 49% of asset value | Up to 70% of assets in debt |
| Investor base | Public (retail investors) | Public (broader base after 2021 SEBI amendments) |
Tax Treatment of REIT/InvIT Distributions
REIT/InvIT distributions to unit holders can consist of multiple components, each taxed differently:
| Distribution Component | Tax in Hands of Unit Holder |
|---|---|
| Dividend from SPV | Taxable as dividend at applicable slab rate (TDS at 10%) |
| Interest income from SPV | Taxable as income from other sources at slab rate (TDS at 10%) |
| Capital gains from SPV | As per capital gains provisions; LTCG/STCG rules |
| Repayment of SPV debt | Exempt (return of capital) |
Section 10(23FCA) and Related Exemptions
- Section 10(23FCA): Income of business trusts (REIT/InvIT) in the form of rent from properties held directly is exempt
- Section 115UA: Special provisions for taxation of income of REIT/InvIT — trust income passed through to unit holders with original tax character
- Exempt SPV dividend: If SPV opts for Section 115BAA (22% corporate tax), dividends to REIT are exempt, and when distributed to unit holders, taxable as dividend
Capital Gains on Sale of REIT/InvIT Units
| Holding Period | Gain Classification | Tax Rate |
|---|---|---|
| Up to 12 months | STCG | 20% (equity STCG rate) |
| More than 12 months | LTCG | 12.5% above Rs.1.25 lakh (ITA 2025 rates) |
STT (Securities Transaction Tax) applies on listed REIT/InvIT unit transactions on exchanges.
Key Indian REITs
- Embassy Office Parks REIT (BSE/NSE) — largest office REIT
- Mindspace Business Parks REIT
- Brookfield India Real Estate Trust
- Nexus Select Trust (retail malls)
Key Indian InvITs
- India Grid Trust (IndiGrid) — power transmission
- IRB InvIT Fund — toll roads
- PowerGrid Infrastructure Investment Trust
- National Highways Infra Trust (NHAI InvIT)
Key Facts About REIT and InvIT
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What is the minimum distribution requirement for REITs?
REITs and InvITs must distribute at least 90% of their net distributable cash flow to unit holders on a semi-annual or quarterly basis. This high distribution requirement ensures regular income to investors and is a key attraction of these instruments.
How is interest income from REIT taxed in the hands of unit holders?
Interest income passed through by REITs from their SPVs to unit holders is taxable as income from other sources at the unit holder's applicable slab rate. TDS at 10% is deducted by the REIT before distribution. This is similar to fixed deposit interest taxation.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
REIT and InvIT: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.
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Why This Matters
Staying compliant with Indian regulations protects your business from penalties, interest and unnecessary legal trouble. It is always wise to maintain proper records and documentation so that any future scrutiny can be handled smoothly.