India Inc still jiffy about REITs/InvITs
The India Inc may not readily jump onto the REITs/InvITs bandwagon and take up the role of sponsors of such trust vehicles with gusto.
This is due to the fact that the sponsors will not get any long-term capital gains tax exemption when they decide to sell the units received by them from the REIT/InvIT in lieu of the shares transferred to these trusts. Simply put, the companies promoting REITs/InvIT will have to pay 20 per cent tax (with indexation benefits) on the long-term capital gains made on sale of units.
The companies could opt for a tax rate of 10 per cent, but without indexation benefit, which factors in the inflation during the holding period. Under SEBI norms, sponsors have to hold at least 25 per cent of the units in any REIT or InvIT for the first three years, and at least 15 per cent thereafter.
The details about the REIT or InvIT and the norms on which they run are yet not clear with the investors especially the tax glitch. It might take some time to sink in into the realty sector before it gets a kick start.
Source: The Hindu Business Line
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