The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026 on August 6, 2026. While there are many income tax amendments relating to corporations and foreign institutions, one tax law amendment relates to special purpose vehicle (SPV) of business trusts of REIT/InvITs which indirectly helps investors. This Bill will need to be passed by the Rajya Sabha and receive the President’s assent before coming into force.
This article explains how this helps REIT and InvIT investors.
If a REIT, InvIT opts for the new tax regime then what does this amendment mean for its unitholders?
The REIT, InvIT holders used to pay no tax on dividends recieved if the trust had opted for old tax regime, but if it opted for new tax regime, unitholders got not such tax exemption. So this amendment changes this and extends the tax exemption on dividends received by REIT, InvIT unitholders even if the REIT, InvIT has opted for the new tax regime.
The Bill amends the taxation framework applicable to Business Trusts by extending dividend tax exemption to unit holders while correspondingly increasing the surcharge on Special Purpose Vehicles (SPVs). Clause (b) of the Schedule V [Table: Sl. No. 5.D] is proposed to be omitted to provide tax exemption on dividend received by a unit holder, even where SPV has exercised the option under section 200 of the Income-tax Act, 2025 to move to new tax regime.
Chartered Accountant Suresh Surana explains that this says that if a Real Estate Investment Trust (REIT) / Infrastructure Investment Trust (InvIT) [through its underlying Special Purpose Vehicle (SPV)] opts for the concessional (new) tax regime, this amendment is favourable for its unitholders.
Surana says: “The amendment provides the exemption of dividend income in the hands of REIT/InvIT unitholders in respect of dividends distributed by an SPV that has opted for the concessional tax regime.”
According to Surana, prior to this amendment, where an SPV opted for the concessional tax regime under Section 200 or 201 of the Income Tax Act, 2025 (corresponding to section 115BAA or 115BAB of the Income Tax Act, 1961), the dividend distributed by such SPV and passed through the REIT/InvIT lost its tax-exempt character and became taxable in the hands of the unitholders.
Neeraj Toshniwal, CFO, Knowledge Realty Trust REIT, says that in the last budget, however, it was clarified that SPVs under the old regime could not carry forward MAT credit, but dividend will be exempt in the hands of unit holders. However, dividend exemption was not permitted under the new tax regime. This issue is now fixed via this amendment in the tax framework.
Toshniwal said to ET Wealth Online: With this amendment in the tax framework, SPVs can now transition to the new tax regime and avail MAT credit set-off of up to 25% of their annual tax liability. Importantly, dividend income distributed by REITs — irrespective of whether they opt for the old or new regime — will now be exempt in the hands of unit holders."
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What is the catch?
SPV of a REIT or InvIT can opt for the new tax regime but this means they need to pay a 25% surcharge, whereas the surcharge rate is 10% under the old tax regime. However, the amendment says that if the SPV opts for the new tax regime, then also its dividend is tax exempt for unitholders. So this decision is not so easy to take and will need careful evaluation by the respective REIT and InvIT.
Surana says: “While the recent amendment enhances the attractiveness of the concessional regime (new tax regime) by exempting dividends in the hands of unit holders, the corresponding increase in surcharge at the SPV level means that the optimal choice will depend on the facts and financial profile of each structure rather than a uniform rule.
The surcharge rates:
