Mumbai: The National Real Estate Development Council (NAREDCO) has urged the Centre to withdraw tax on the dividend received by InvIT/REIT unitholders.
It has said that instead, InvITs/REITs should be provided a single-stage taxation structure as is currently available under the prevailing regulations, to keep the product attractive to attract both foreign and domestic capital inflows.
In a letter to Economic Affairs Secretary Atanu Chakraborty, NAREDCO argued that continuation of dividend exemption in the hands of the unitholders will help in destressing the banking system as InvITs and REITs would be able to raise equity funds, which could replace the debt funds.
Successful InvITs and REITs would make the infrastructure and commercial real estate sector more robust and attract larger employment, which will help in revival of the economy and job creation which has been the focus of this government, it said.
"The Government's objective underpinning the taxation framework for InvITs/REITs was to provide for a single level of taxation on the income earned on the underlying assets. If the proposed amendments in relation to InvITs/REITs were to be implemented, the basic design principle of a single level of tax on income of the underlying assets held by InvITs/REITs would be compromised," Niranjan Hiranandani, National President, NAREDCO, said.
"Instead of a single level of tax, income from the underlying assets would be subject two levels of taxation - once at the level of the SPV; the second level of tax would apply to the unitholders, when the post-tax income of the SPV is distributed by the InvITs / REITs to the unitholders," he added.
The Finance Bill, 2020 has imposed tax on the dividend distributed to unitholders of the InvITs& REITs in the hands of the unitholders. The Bill aims at moving the incidence of tax on dividend from the companies to the recipients.
InvITs/REITs, as a platform, have globally generated huge investment opportunities and the cumulative market capitalization is approaching $2 trillion. Of the Grade A office space stock of over 500 million square feet in India, as per JLL Research, 294 million square feet of office space stock would be eligible for REITs in India. This would translate to potential investment of $35 billion.
Besides there are many Infrastructure assets including roads, ports, telecom assets, power assets, railways, etc. that could be listed as InvITs.