Reits may not get complete pass through status
Pass-through status means taxes on the income distributed by Reits to unit holders will be paid by unit holders and not the Reits
Oct 06, 2014
Source : Business Standard
Real Estate


New Delhi: Contrary to a promise made in the Budget for 2014-15, the proposed real estate investment trusts (Reits) might not get a full pass-through status.

Reits are listed entities investing in income-producing real estate assets, the earnings of which are mostly distributed to shareholders.

While Budget 2014-15 had announced pass-through status for these trusts, the Securities and Exchange Board of India (Sebi) announced the guidelines for Reits late last month.

Pass-through status means taxes on the income distributed by Reits to unit holders will be paid by unit holders and not the Reits. This was one of the major demands of those interested in coming out with Reits.

However, tax experts say a complete pass-through status has not been given to the trusts for the purpose of taxation. Provision for tax on Reits is contained in the Finance Bill, 2014.

Hemal Mehta, senior director, Deloitte India, explained the Sebi norms allow Reits to either acquire the shares held in a special purpose vehicle (SPV) by the developer or acquire the real estate asset directly under the trust.

If a developer transfers shares held in an SPV to a Reit, capital gains tax would not be immediately applicable. The developer would be liable to pay when he sells units of the Reit to investors, which may be retail investors on a stock exchange. At this time, capital gains tax would be payable by the developer on sale price of units minus indexed cost of holding of shares in the SPV.

Now, on these units held by investors, different kinds of income can be generated, which will be passed on by Reits to unit holders. These may be dividend, interest or capital gains.

If it is interest on units, then the SPV will pass it to the Reit, which will cut the withholding tax - 10 per cent in case of resident Indians and five per cent in case of non-residents. The unit holders will pay tax on such interest depending on their income slab and take credit of withholding tax. Non-resident will pay according to rules in his country, but nothing further in India. In this case, it is a some sort of a pass-through.

Latest Realty News

Godrej Properties adds new housing project in Mumbai
Oct 06, 2014
Realty firm Godrej Properties Ltd said it has entered into an agreement with a land owner to develop an affordable housing project near Mumbai
Flat-owners urge Centre to draft new builder-buyer pact
Oct 06, 2014
Apartment owners in Ghaziabad have asked the Union ministry of urban development to formulate a 'model builder-buyer agreement' that reduces disputes and litigations in housing projects in the city
Seeking action against land-grabbers, activists to begin fast today
Oct 06, 2014
After having staged protests against “inaction” of the government against land-grabbers for nearly a month, a group of protesters have decided to launch an indefinite fast till all their demands are met
Raining discounts for property buyers this season
Oct 06, 2014
The realty market has been abuzz with activity this festival season. Discounts, freebies, various financing schemes and advertisements across various media are making buyers sit up and look for the best deal
Modi Asks EC to Probe Haryana Government's Clearance to Vadra Land Deal
Oct 06, 2014
Prime Minister Narendra Modi on Monday asked the Election Commission to take serious note of Chief Minister Bhupinder Singh Hooda clearing the land deal between Robert Vadra and DLF
Sell Unused Lands to Government, KCR Tells NRIs
Oct 06, 2014
The TRS government, which is finding it difficult to spot sufficient government and private land for its ambitious scheme of distributing three acres each to landless Dalit families in the state, has now begun appealing to Telangana NRIs and industrialists to sell their unused land to the government
NDMA says residential high-rise towers don't conform to earthquake safety standards; comes up with n...
Oct 06, 2014
The National Disaster Management Authority (NDMA) under the home ministry has come out with norms on seismic retrofitting of deficient buildings
Land pooling: AP advised to involve private firms
Oct 06, 2014
The Andhra Pradesh government, which is exploring various systems of land pooling for building its new capital city, has been advised to assign the task of holding negotiations with farmers to private agencies
Late delivery, errant builders leave buyers flat-broke in Mumbai
Oct 06, 2014
In central Mumbai, buyers who booked flats worth Rs 20-50 crore are still waiting for their homes because the project is stuck in litigation for the past three years
DDA Housing scheme 2014: Hurry!!! Only 5 days left to apply for flats
Oct 06, 2014
Have you applied for the DDA flats? If yes, then we wish good luck to you, but if you still haven't applied and wish to own a dream home in the form of a DDA flat, then, please hurry as the ambitious scheme will only last for 5 days, till October 9

Latest Realty News Of State

Realty Talk's