Budget 2025 proposes Amendment to Section 115UA for Taxation of REITs and InvITs
The Union Budget 2025 proposes an amendment to Section 115UA to include long-term capital gains for REITs and InVITs, aligning them with the tax rules for equity shares, effective from April 1st, 2026
Budget 2025 – Amendment – Section 115UA – Taxation – REITs – InvITs – Union Budget 2025 – Budget 2025 India – Budget 2025 Highlights – Budget 2025 News – Budget 2025 Updates – Budget 2025 Impact – taxscan
Budget 2025 – Amendment – Section 115UA – Taxation – REITs – InvITs – Union Budget 2025 – Budget 2025 India – Budget 2025 Highlights – Budget 2025 News – Budget 2025 Updates – Budget 2025 Impact – taxscan
The Finance Minister Nirmala Sitharaman unveiled the Union Budget 2025 on February 1st, 2025, marking her eighth consecutive budget under the Modi Government 3.0. Among the key proposals, the budget introduces an amendment to Section 115UA of the Income-tax Act, impacting the taxation framework for Real Estate Investment Trusts (REITs), which invest in income-generating real estate assets, and Infrastructure Investment Trusts (InVITs), which focus on investments in infrastructure projects.
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Currently, Section 115UA provides a pass-through status to business trusts, allowing income from interest, dividends, and rental income to be taxed in the hands of unit holders rather than the trust itself. However, there is no reference to Section 112A, which governs the taxation of long-term capital gains on equity shares, units of equity-oriented funds, and business trust units.
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The proposed amendment, as part of Clause 25, seeks to correct this omission by adding a reference to Section 112A in sub-section (2) of Section 115UA. This change ensures that the tax treatment of long-term capital gains from business trusts aligns with the existing framework for equity shares and similar assets. This will allow for consistent tax reliefs on long-term capital gains for REITs and InVITs, which were previously excluded.
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This amendment is aimed at further streamlining the tax structure for business trusts and making them more attractive to investors. It will enhance the predictability and stability of the tax regime for these investment vehicles.
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The change is set to take effect from April 1st, 2026, applying to the assessment year 2026-27 and subsequent years, reflecting a forward-looking approach to improve the tax framework for business trusts in India.
To Read the full text of the Finance Bill CLICK HERE
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