Recent Indian tax reforms are expected to slightly buoy Real Estate Investment Trusts and Infrastructure Investment Trusts, while intensifying tax pressures on infrastructure special purpose vehicles as they navigate between old and new regimes, according to a Share India report.
India’s new tax amendments are likely to give Real Estate Investment Trusts and Infrastructure Investment Trusts a modest lift, while also nudging more infrastructure special purpose vehicles towards the newer corporate tax regime over time, according to a Share India Institutional Business report cited by The Hindu BusinessLine. The Taxation and Other Laws (Amendment) Bill, 2026, passed on Thursday, also updates the Income-tax Act, 2025, the Finance Act, 2026 and the Payment and Settlement Systems Act, 2007. The report suggests the changes should simplify the flow of income from project-level companies to trust investors, even as they alter how those companies manage tax liabilities.
The biggest immediate change is that dividends paid by special purpose vehicles to REIT and InvIT investors will now be exempt from tax regardless of whether the underlying company stays with the old regime or switches to the new one. That marks a shift from the earlier position, when the exemption depended on the special purpose vehicle remaining in the old regime. PwC’s India tax summaries explain that REITs and InvITs are designed as pass-through vehicles, with income such as rent or operating cash flow generally flowing through to unit holders rather than being taxed repeatedly at the entity level.
At the same time, the bill leaves a sharper tax edge for infrastructure companies that opt into the new regime. The Share India report says those special purpose vehicles will face a surcharge of 25% instead of the 10% surcharge that applies to other companies. Under the old regime, many infrastructure vehicles had relied on Section 80-IA tax holidays and paid little or no regular corporate tax, though they often accumulated Minimum Alternate Tax credits for later use. A Bombay Chartered Accountants’ Society memorandum on the Finance Bill had warned that the treatment of those dividends and credits was a key issue for REIT and InvIT investors.
The transition is expected to be gradual rather than abrupt. From FY2026-27, special purpose vehicles that remain in the old regime will pay Minimum Alternate Tax at a reduced 14%, but that tax will be final and no new MAT credits can be built up after April 1, 2026. Existing credits can be used only after a switch to the new regime and then only against up to 25% of that year’s liability. The report says companies with little credit balance and ongoing tax holiday benefits may stay put, while those with expired holidays or sizeable accumulated credits are more likely to move, a pattern that could raise costs for tax-exempt institutional investors over the next few quarters.
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