If you earn dividend income from REITs or InvITs, a proposed tax change could reduce your tax liability in certain cases. The Lok Sabha has passed the Taxation and Other Laws (Amendment) Bill, 2026, which proposes exempting specific dividend income received through eligible business trusts.
Many of you invest in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) for regular income. However, the tax treatment of these distributions has varied depending on how the income is received and the tax regime followed by the trust.
What are REITs and InvITs?
REITs (Real Estate Investment Trusts) own and manage income-generating real estate such as office buildings, shopping malls, warehouses and commercial properties. They allow you to invest in these assets without buying or managing the properties yourself.
InvITs (Infrastructure Investment Trusts) own and manage income-generating infrastructure assets such as highways, power transmission lines, renewable energy projects and telecom towers. They let you invest in these projects without owning the assets directly.
Lok Sabha approves the proposed tax relief
The Taxation and Other Laws (Amendment) Bill, 2026, has been passed by the Lok Sabha. Among its provisions is a proposal to exempt dividend income distributed by a Special Purpose Vehicle (SPV) to a REIT or InvIT, and subsequently received by you, provided the business trust has opted for the new tax regime.
An SPV is the company that owns the underlying real estate or infrastructure assets on behalf of the trust.
Why does this matter?
If the proposal becomes law, eligible dividend income received through qualifying REITs and InvITs will no longer be taxable in your hands under the specified conditions.
The Bill also includes changes relating to the Minimum Alternate Tax (MAT) framework for eligible business trusts. These measures are intended to align the tax treatment of REITs and InvITs operating under the new tax regime.
What happens next?
The Lok Sabha’s approval is a significant legislative milestone. The Bill will now be considered by the Rajya Sabha. It will become law after it is approved by both Houses of Parliament and receives the President’s assent.
Detailed operational guidelines, if required, are expected to follow after the legislative process is completed.
Summary
The Lok Sabha has approved a proposal that could exempt certain REIT and InvIT dividend income from tax for eligible unitholders. Although the proposal has moved forward in Parliament, the revised tax provisions will take effect only after the remaining legislative approvals are completed.
Source: The finance bill 6-Aug-2026
