REITs, in comparison to direct real estate investments, allow investors to make affordable investments by purchasing highly liquid shares of the property. The income tax norms also provide investors with indexation benefits and much more.
A real estate investment trust is a company that owns and operates commercial or income-producing real estate properties. These are the corporations that manage the portfolio of high-value real estate properties and other projects. This investment has been popular in the past due to its high liquidity, capital appreciation and steady dividend income, transparency and on top of all that, they also allow investors to diversify their portfolios.
Several experts have emphasized the benefits of long-term investing in REITs. Comparing REIT real estates to direct real estate investment, REITs are more liquid and can be diversified. While in traditional real estate investments, the income earned is usually the difference between a property’s buying and selling price, in REITs, cost appreciation is applied to the income which reduces the net income-tax outgo.
Also read: Can Indian Investors Safely Invest in REITs?
Talking about the REIT tax benefits on long-term REIT real estate investments, experts also point out that the interest and dividends received by the REIT from SPVs are exempt from tax on REIT income, along with the rental income tax.
REITs also give you the liberty of selling your stocks over a number of years, this way the capital gains can be easily spread along the years, but when you sell a real estate property, your entire gain will be taxed in the same year.
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A real estate investment trust is a company that owns and operates commercial real estate properties and projects.
REITs are usually traded like ETFs (Exchange Traded Funds) in the stock market. It is similar to purchasing units on the stock market. Demat accounts are a must to invest in REIT Real Estate Investment in India.
If you invest in a REIT investment for less than three years, it will be considered a short term investment and so you will have to pay 15% tax only.
Another way you can reduce the tax paid is by withdrawing the money from REITs over a span of years share by share, this way you will not have to pay a large amount of tax in one go.
Let us look at some of the key aspects that have aided NRI, OCI, PIO real estate investments in India. Non-Resident Indians (NRIs) who want to participate in the Indian real estate market should be aware of the rules that govern the purchase, sale, and rental income generated by a property.
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