REIT, InvIT unitholders can gain from new tax regime

Published 11 August 2026 · india

The maximum effective tax rate under the old tax regime is 34.94% but under new tax regime, it is 28.60% for REIT, InvIT trusts Particulars

The maximum effective tax rate under the old tax regime is 34.94% but under new tax regime, it is 28.60% for REIT, InvIT trusts Particulars Income ≤ Rs 1 crore Income > Rs 1 crore, but ≤ Rs 10 crore Income > Rs 10 crore Old Tax Regime Turnover or gross receipts in financial year 2024-25 ≤ Rs 400 crores 26 %(Nil surcharge) 27.82% (surcharge rate of 7%) 29.12%(surcharge rate of 12%) Turnover or gross receipts in financial year 2024-25 ≤ Rs 400 crores 31.20% (Nil surcharge) 33.38%(surcharge rate of 7%) 34.94%(surcharge rate of 12%) New Tax Regime Pre Amendment 25.17%(surcharge rate of 10%) Post Amendment 28.60%(surcharge rate of 25%) SPVs are liable to pay tax under MAT in old tax regime SPVs have accumulated MAT credit Unit holders would receive higher net (post tax) proceeds on distribution How REIT unitholders can benefit Ta free dividends: Dividends distributed by REITs remain exempt from tax in the hands of unit holders. Dividends distributed by REITs remain exempt from tax in the hands of unit holders. MAT credit relief: Accumulated MAT credit can be adjusted against up to 25% of annual tax liability. Accumulated MAT credit can be adjusted against up to 25% of annual tax liability. No MAT burden: Minimum Alternate Tax will not apply under the new regime. How InvIT unitholders can benefit If the surcharge is 25% under the new regime versus 10% under the old regime, why would an InvIT opt for the new regime? The Lok Sabha approved the Taxation and Other Laws (Amendment) Bill, 2026 on August 6, 2026 which includes a significant amendment about tax laws of business trusts. For individual investors, this means that if they invest in REITs, InvITs or REIT, and the trust has chosen the new tax regime, the dividend will be ta exempt. Previously, dividends were ta exempt only if the trust had opted for the old tax regime.Another positive update is that the maximum effective tax rate under the old tax regime is 34.94%, while under the new tax regime, it drops to 28.60% for REIT and InvIT trusts.

This suggests that if the REIT, InvIT trust has such an internal structure that benefits from switching to the new tax regime, the respective REIT or InvIT can have more distributable cash for reinvestment or distribution to unitholders.However, deciding to switch the tax regimes isn't a simple choice, as each REIT and InvIT trust needs to assess whether switching to the new tax regime is beneficial for them and their unitholders.Also there is a catch with the new tax regime which is that if a trust opts for the new tax regime, it has to pay a 25% surcharge instead of the 10% surcharge payable under the old tax regime. Experts believe that beyond the dividend tax exemption, the real opportunity lies in more potential for greater distributable surplus for REIT, InvIT investors, if the trust can make it work.An FAQ from the Income Tax Department read as follows: "Clause (b) of the Schedule V [Table: Sl. No. 5.D] is proposed to be omitted to provide exemption on dividend received by a unit holder, even where SPV has exercised the optionunder section 200 of the Income-tax Act, 2025 to move to new tax regime."Read on for a complete analysis.The effective tax rates under the old tax regime and the new tax regime are summarised below:Source: Dentons Link LegalMitesh Jain, partner, Dentons Link Legal, says that as can be seen from the above table, the maximum effective tax rate for companies under the old tax regime is 34.94% whereas under the new tax regime, it is only 28.60% (even after the proposed increase in surcharge rate from 10% to 25%).Further, Jain says that the taxation under the old tax regime and the new tax regime differ on various parameters such as tax treatment to certain deductions and exemptions, applicability of MAT, eligibility to claim MAT credit etc. resulting in different tax liability under the old tax regime and the new tax regime.Therefore, Jain from Dentons Link Legal says that with the increase in surcharge rate under the new tax regime, SPVs will have to undertake a thorough overall cost-benefit analysis under both the tax regimes by not only considering the tax impact at SPV level but they will also have to factor in savings in tax cost for unitholders due to the proposed exemption on dividend income received from SPVs opting for the new tax regime.Jain says that because of the following reasons, SPVs are likely to opt for new tax regime:REITs invest in real estate assets and generate income either by rental or property price appreciation.