Lack of clarity on tax aspects hampering implementation of REIT regime
Last year, SEBI announced the draft Real Estate Investment Trust (REIT) regime. The move was widely hailed by the beleaguered real estate industry as an advance in the right direction and a potential redeemer of the industry.
However, the REIT regime is still to be effectively implemented because of a number of reasons; the most important one among those being the lack of clarity on tax aspects for REIT regulations.
With the current REIT provisions being somewhat vague in terms of tax treatment for the sponsor, the REIT itself, as well as the contributors (investors), it is essential that tax aspects for REIT regulations are clarified, so that tax implications in a REIT structure can be assessed for the perspective of the parties involved.
Meanwhile, along with lack of clarity on tax aspects, another obstacle in the way of the implementation of the REIT regime is the levy of stamp duty in a situation where real estate is contributed to a REIT. The stamp duty is payable technically, because the situation involves a transfer of real estate.
The levy of stamp duty acts as a deterrent to setting up REITs in India because it would largely be an outgo unless the payer receives cash. But, this concern can apparently be addressed by introducing a deferral system of payment of stamp duty.
Source – The Economic Times
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