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Feb 18, 2020
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Dividend tax on REITs/InvITs unit holders: FM Sitharaman says weighing concerns
Finance minister Nirmala Sitharaman on Monday said that the government was considering suggestions received on taxation liability imposed on unit holders of REITS and InvITs after the Budget reverted to the classical system of taxing dividend in the hands of recipient. She was speaking at a post-Budget session with industry representatives in Bengaluru.
Expert said that with the change in the dividend distribution tax (DDT), the foreign investors in REITs/InvITs were at a disadvantage now. Hitherto, dividend received by REIT/InvIT from 100% SPV was not liable to DDT and not taxable either in the hands of REIT/InvIT or investors. This was based on the rationale that the SPV paid tax on rental and other incomes earned and hence there cannot be multiple points of taxation. But as per Budget proposal, the unit holders will need to pay tax on dividend income received from such SPVs and distributed by REIT/InvIT leading to double taxation in the hands of SPV and unit holders.
“This will adversely impact return in the hands of unit holders. The government needs to relook at this proposal and restore the single point of taxation as prevailed earlier.
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