Dividend tax to hit Rs 1.1 lakh crore pipeline, fear InvITs, REITs

With the proposed taxation on dividends, real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) fear this would put the potential pipeline to raise Rs 1.14 lakh crore through these platforms at risk as investors and promoters consider overseas jurisdictions. REITs and InvITs — which have attracted top global investors like Blackstone, KKR, Singapore’s GIC, CPPIB, Abu Dhabi Investment Authority and Brookfield — are mandated by Sebi to distribute 90 per cent of their cash flows as dividends which significantly increases the tax burden of investors.

This week, investors and developers told TOI they met officials in the financial ministry to remove this double taxation, which will increase the total tax outgo by over 60-65 per cent for both domestic and foreign investors, making India less competitive as compared to markets like Singapore.

“The government is taxing the annuity income of special purpose vehicles (SPVs) created. Now on that taxed income, the SPVs distribute returns to unitholders and investors and if that is taxed as well, it’s creating a double layer of taxation. Investors would then prefer putting their money in other instruments offering higher returns,” said Bobby Parikh of tax advisory firm Bobby Parikh Associates.


Since introduction, this asset class has already raised Rs 26,600 crore and several in the pipeline include government-sponsored InvITs for National Highway Authority (NHAI), Gas Authority of India (GAIL) and Power Grid Corp. Embassy Office Parks was the first REIT listed last year after which several others, including one from K Raheja is in the works to raise about Rs 3,750 crore.