Published Jun 16, 2026 4 Min Read

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Introduction

Tax on REIT is not the same for every income component. Interest income, rental income, dividends, and capital gains may all have different tax treatment under Indian tax laws.

  • Interest received from a REIT is generally taxable at your applicable income tax slab rate.
  • Rental income distributed by a REIT under Section 115UA is generally taxable in the hands of investors.
  • Certain REIT dividends may be exempt, while others may be taxable depending on the source of distribution.
  • Long-term capital gains on listed REIT units may qualify for concessional tax treatment if holding-period conditions are met.
  • TDS may apply to some REIT distributions before the income reaches your account.
  • You must report REIT income separately in your Income Tax Return (ITR) based on the nature of the income received.

You can learn about investment products and track investments through the Bajaj Broking website while understanding how tax on REIT affects your post-tax returns.

What is a REIT?

A Real Estate Investment Trust (REIT) is an investment vehicle that owns or operates income-generating real estate assets. It allows you to invest in commercial real estate without directly buying property.

REITs in India are regulated by Securities and Exchange Board of India (SEBI). They are listed on stock exchanges and can distribute income earned from underlying properties to investors.

FeatureDescription
Full formReal Estate Investment Trust
RegulatorSEBI
Investment focusIncome-generating real estate
TradingListed on stock exchanges
Income sourcesRent, interest, dividends, capital gains

How is REIT income taxed (Section 115UA) in India?

REIT taxation depends on the type of distribution you receive. Different parts of the payout may be taxed differently under the Income Tax Act.

Income TypeTax Treatment for Resident Investors
Interest incomeTaxable at applicable slab rate
Rental incomeGenerally taxable in investor's hands under applicable provisions
Dividend incomeMay be exempt or taxable depending on the source and conditions
Return of capitalMay reduce acquisition cost for future capital gains calculations

Interest income

Interest distributed by a REIT is generally taxable according to your income tax slab. The REIT may deduct TDS before distributing the amount.

Rental income

Rental income passed through a REIT under Section 115UA is generally taxable in your hands. The applicable tax depends on the relevant provisions of the Income Tax Act.

Dividend income

Dividend taxation depends on how the underlying special purpose vehicle (SPV) is taxed. Some dividends may be exempt, while others may be taxable for investors.

Return of capital

Certain distributions may be treated as repayment of capital rather than income. These distributions can affect the cost of acquisition used when calculating future capital gains.

Capital gains tax on REIT units in India

Capital gains tax applies when you sell REIT units at a profit.

The tax treatment depends on your holding period and the applicable tax rules in force when the units are sold.

Type of GainGeneral Basis
Short-term capital gainApplies when units are sold before qualifying long-term holding period
Long-term capital gainApplies when units are held beyond the prescribed holding period
Tax liabilityDepends on applicable tax provisions and investor category

You should check the latest tax rules applicable for the financial year in which you sell the units because capital gains provisions may change through amendments in tax laws.

How do you calculate taxable income from REIT?

You can calculate your taxable REIT income by identifying each component of the distribution separately. The process usually takes only a few minutes if you have your annual statement.

Steps

  1. Collect your REIT distribution statement and annual tax documents.
  2. Identify interest income received during the financial year.
  3. Separate rental income, dividend income, and any return-of-capital distribution.
  4. Apply the relevant tax treatment to each income component.
  5. Add all taxable components to arrive at total taxable REIT income.
  6. Adjust acquisition cost if any distribution is classified as return of capital.
  7. Calculate capital gains separately if you sold REIT units during the year.

How do you report REIT income in your ITR?

Reporting REIT income correctly helps avoid tax notices and mismatches. Keep all distribution statements and broker reports ready before filing.

Steps

  1. Download the annual tax statement from your broker or depository account.
  2. Classify income as interest, dividend, rental income, or capital gains.
  3. Enter interest income under the applicable income schedule in your ITR.
  4. Report capital gains in the capital gains schedule if units were sold.
  5. Verify TDS details using Form 26AS and the Annual Information Statement (AIS).
  6. Review all entries before submitting the return.
  7. E-verify the ITR through the income tax portal after filing.

Conclusion

REIT income tax in India depends on the nature of the income received. Interest, rental income, dividends, and capital gains may all have different tax treatment.

Understanding reit taxation can help you estimate post-tax returns and file your ITR correctly. Always review the latest Income Tax Act provisions applicable to the relevant financial year before making tax-related decisions.

Frequently asked questions

Is REIT dividend tax free in India?

Tax on REIT dividends depends on the source of the distribution and the tax status of the underlying entity. Some REIT dividends may be exempt, while others may be taxable in your hands. You should review the REIT's annual tax statement to determine the exact treatment. The Bajaj Broking website can help you understand investment concepts, but taxability is governed by the Income Tax Act.

Is there double taxation on REITs in India?

REIT structures are designed to reduce multiple layers of taxation through pass-through provisions under Section 115UA. However, different components of REIT distributions may receive different tax treatment. You should examine each component separately rather than assuming the entire distribution is taxed twice.

Are REITs and InvITs taxable in India?

Yes. Both REITs and Infrastructure Investment Trust (InvITs) are taxable in India. The taxation depends on whether the income is interest, dividend, rental income, or capital gains. Specific provisions under the Income Tax Act determine how each component is taxed for resident and non-resident investors. The Bajaj Broking website provides educational resources about investment products and taxation concepts.

How is interest income from REIT taxed for residents?

Interest income distributed by a REIT is generally taxable at your applicable income tax slab rate. In some cases, TDS may be deducted before the payment reaches your account. You should report the income under the relevant ITR schedule and reconcile it with Form 26AS and AIS records.

Which ITR form should I use to report REIT income?

The correct ITR form depends on your overall income sources and tax profile. REIT income may need to be reported under schedules relating to interest income, capital gains, or other applicable categories. You should choose the ITR form that matches your income structure and verify reporting requirements for the relevant assessment year.

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