Is REIT income tax-free?

A REIT payout can be dividend, interest, rental income, or repayment of the REIT's own debt - and each part is taxed differently in your hands. Since April 2023, even the debt-repayment portion (once tax-free) is taxable as 'other income' at your slab rate. Interest and rental components are generally taxed at the unit holder's slab rate Dividend is exempt if the underlying SPV has not opted for the concessional 22% corporate tax rate, else taxable 'Repayment of debt' component, tax-free before April 2023, is now taxed as 'income from other sources' at slab rate Gains on selling REIT units on the stock exchange are separately taxed as capital gains (12.5% LTCG over 12 months, 20% STCG) Your REIT's annual tax break-up statement tells you how much falls in each category

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How Are REIT Dividends Taxed?

Short answer: A REIT payout can be dividend, interest, rental income, or repayment of the REIT's own debt - and each part is taxed differently in your hands. Since April 2023, even the debt-repayment portion (once tax-free) is taxable as 'other income' at your slab rate.

Law: Sections 10(23FC), 10(23FCA), 115UA, Income-tax Act 1961 · Authority: CBDT · Status: in force (effective 1 Apr 2023) · Checked 25 Sept 2026

What you need to know

Interest and rental components are generally taxed at the unit holder's slab rate
Dividend is exempt if the underlying SPV has not opted for the concessional 22% corporate tax rate, else taxable
'Repayment of debt' component, tax-free before April 2023, is now taxed as 'income from other sources' at slab rate
Gains on selling REIT units on the stock exchange are separately taxed as capital gains (12.5% LTCG over 12 months, 20% STCG)
Your REIT's annual tax break-up statement tells you how much falls in each category

Who this applies to: investors

Official / primary source: incometaxindia.gov.in (government source)

The law behind it

Taxation of REIT/InvIT Distributions - Dividend, Interest, Rental and 'Other Income'

Money a REIT pays out to unit holders can be dividend, interest, rental income, or return of capital, and each is taxed differently. Since April 2023, the part of a payout that is really a repayment of the REIT's debt is no longer tax-free and must be taxed as 'other income' in the unit holder's hands.

Sections 10(23FC), 10(23FCA), 115UA, Income-tax Act 1961 · amended · source

Cash Restrictions on Property Deals - Sections 269SS, 269ST and Penalty Sections 271D/271DA

Indian tax law strictly limits cash in property deals: no more than Rs 20,000 cash can be taken as a loan, deposit or advance towards a property, and no more than Rs 2 lakh cash can be received in total from one person for a sale. Breaking either rule means a penalty equal to the entire cash amount involved.

Sections 269SS, 269ST, 271D, 271DA, Income-tax Act 1961 · in force · source

Sections 54D, 54G, 54GA (1961) - Compulsory Acquisition & Industrial Relocation Exemptions

Three narrower exemptions for industrial property: 54D for compulsorily-acquired land/building, 54G for shifting out of an urban area, 54GA for shifting specifically into an SEZ. All three continue as Sections 84, 87 and 88 under the 2025 Act.

Sections 54D, 54G, 54GA, Income-tax Act 1961 (now Sections 84, 87, 88, Income-tax Act 2025) · in force · source

RERA Sections 9-10 — Registration and Duties of Real Estate Agents

Property brokers and agents — including anyone who introduces buyers and sellers for a fee — must register with the state RERA before facilitating any sale; one registration covers the whole state. They also cannot deal in unregistered projects or make false claims.

Sections 9 and 10, Act No. 16 of 2016 · in force · source

Work out your own numbers

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