REITs set to gain tax flexibility, cash flow boost under new Bill

Real Estate Investment Trusts (REITs) are set to gain greater tax flexibility and potentially lower cash tax outgo, with the Taxation and Other Laws (Amendment) Bill, 2026, allowing their special purpose vehicles (SPVs) to opt for the concessional tax regime while retaining tax-exempt treatment of dividends distributed to unitholders.

The proposed changes, under the Bill cleared by the Lok Sabha on Thursday, are significant for REITs as SPVs opting for the concessional tax regime will benefit from a lower tax rate and will not be required to pay Minimum Alternate Tax (MAT) going forward. The Bill also enables such entities to utilise accumulated MAT credits, subject to the final enacted provisions.

The changes are expected to strengthen the tax neutrality of the REIT structure and could improve distributable cash flows by reducing cash taxes at the SPV level.


“It allows REITs to transition to the new corporate tax regime while maintaining the existing tax treatment of distributions in the hands of unitholders. This continuity was always integral to the REIT structure and an important factor in preserving the attractiveness of this instrument,” said Preeti Chheda, CFO, Mindspace REIT and Executive Committee Member, Indian REITs Association.

According to her, this clarity strengthens the case for REITs as a stable, income-generating investment avenue, and reflects the government's ongoing efforts to build a progressive, globally competitive regulatory framework supporting long-term capital formation and the continued growth of the REIT ecosystem in India.

“By enabling REIT SPVs to opt for the Concessional Tax Regime (CTR) and utilise accumulated MAT credits, while preserving the tax-exempt treatment of dividends distributed to unitholders, the Bill upholds the principle of tax neutrality that is fundamental to the REIT model. REIT SPVs opting for this regime will also benefit from a lower tax rate and will not be required to pay Minimum Alternate Tax (MAT) going forward,” said Amit Shetty, CEO, Embassy REIT.

According to him, for Embassy REIT, the proposed provisions could restore the economic value of around Rs 592 crore of accumulated MAT credits that had previously been written off in its books of accounts.

The MAT credit provision could also have a direct impact on cash flows for REITs with significant accumulated credits. Instead of remaining an accounting asset with limited economic value, the credits could translate into lower cash tax payments if the relevant SPVs opt for the concessional regime and meet the conditions prescribed under the amended provisions.

The Bill now moves to the Rajya Sabha for approval and the President’s assent before taking effect.

The proposed tax changes come as listed REITs have emerged as an important channel for institutional and retail investment in income-generating commercial real estate. The structure enables investors to participate in commercial property through listed units while providing property owners access to long-term capital.

For REIT SPVs, the ability to choose the concessional tax regime without triggering a change in the tax treatment of dividends for unitholders could provide greater flexibility in managing their tax structures.