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Tax implication on investors in REIT and InvIT due to DDT changes is retrograde in nature, say experts

videos | Feb 7, 2020 6:05 PM IST

Tax implication on investors in REIT and InvIT due to DDT changes is retrograde in nature, say experts

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The budget proposes to tax investors in business trusts like REITs and InVITs by way of the changes made in the dividend distribution tax. The industry has sought a rollback on this.

The budget proposes to tax investors in business trusts like REITs and InVITs by way of the changes made in the dividend distribution tax. The industry has sought a rollback on this.

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Nisha Poddar spoke with Sanjeev Krishan Partner at PwC, Harsh Shah CEO of IndiGrid and Hardik Shah MD of KKR to understand the fine print and impact as all business trusts are not dividend-paying.
Krishan said, "We believe that it is a retrograde step in terms of taxing the dividends in the hands of investors paid by InvITs and REITs considering the fact that the regulations came about a few years back. Having said so, it doesn't impact all InvITs and REITs in the same proportion. There are InvITs that are dependent on interest as majority form of distribution is less impacted because they are already taxable and therefore not incrementally impacted. However there are other InvITs and REITs which are dependent on dividends as part of a major form of distribution, they are going to be impacted, their investors are going to see a large part of their returns reducing."
Hardik Shah said, "From our perspective, this does hurt post-tax returns more so for domestic investors than foreign investors. We still think InVITs are a great product and a great structure to own infrastructure assets through. So we will continue to invest in InVITs but given the reduction in post-tax returns because of the added tax burden the valuations that InVITs and REITs can offer for assets will definitely reduce."
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