How are REITs and InvITs taxed in India? Complete taxation guide for Investors

Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) allow investors to participate in income-generating real estate and infrastructure assets without owning them directly.

REITs typically invest in commercial properties such as office spaces and shopping malls, while InvITs focus on infrastructure assets like roads, power transmission lines, and renewable energy projects.

How REITs and InvITs operate

REITs and InvITs do not usually hold assets directly. Instead, they invest through Special Purpose Vehicles (SPVs). Investor funds are pooled at the trust level and then transferred to SPVs, which own and operate the underlying assets. Because of this structure, REITs and InvITs are treated as business trusts for taxation purposes.

Pass-through taxation

Taxation of REITs and InvITs is governed by Section 115UA of the Income Tax Act. These trusts enjoy pass-through status, meaning income earned by the trust is taxed directly in the hands of unit holders, as if they earned it themselves. As a result, there is no double taxation at both the trust and investor levels.

Taxation of income distributed by REITs and InvITs

"The tax you pay depends on the type of income you receive. Interest income is taxed as per your income tax slab. Rental income & dividend from REITs are also taxed at slab rates. When you sell REIT or InvIT units, the profit is taxed as capital gains. Short-term gains are taxed at 20%, while long-term gains are taxed at 12.5%. This tax rate is applied on the gains above the basic exemption limit of ₹1.25 lakh," said CA Abhishek Soni, CEO & Co-founder, Tax2win.

As explained by CA Abhishek Soni, these capital gains rates apply only to gains above the basic exemption limit.

Recent regulatory change: REITs reclassified

The change was formalised through a SEBI circular issued on November 28, 2025, marking a significant shift from the earlier classification where REITs were typically grouped under hybrid or other asset categories.