Budget 2023-24 has brought about significant changes in the tax implications for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (Invits). This article will focus on the tax implications for different tax slabs and how it will impact the investment decisions of individuals.
Tax Implication for REITs and Invits:
As per Budget 2023-24, the income generated from REITs and Invits is considered as business income and will be taxed at the applicable slab rate. Previously, the income from REITs and Invits was considered as capital gains and taxed at a lower rate.
Tax Implication for Different Tax Slabs:
The following table illustrates the tax implications for different tax slabs:
| Tax Slab | Income from REITs & Invits (in Rs) | Tax @ Slab Rate (in Rs) | Cess @ 4% (in Rs) | Total Tax (in Rs) |
|---|---|---|---|---|
| Up to Rs. 2,50,000 | NIL | NIL | NIL | NIL |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% of the amount exceeding Rs. 2,50,000 | As per slab rate | 4% of the tax liability (in Rs) | As per slab rate + 4% of the tax liability (in Rs) |
| Rs. 5,00,001 to Rs. 7,50,000 | 12,500 + 10% of the amount exceeding Rs. 5,00,000 | As per slab rate | 4% of the tax liability (in Rs) | As per slab rate + 4% of the tax liability (in Rs) |
| Rs. 7,50,001 to Rs. 10,00,000 | 37,500 + 15% of the amount exceeding Rs. 7,50,000 | As per slab rate | 4% of the tax liability (in Rs) | As per slab rate + 4% of the tax liability (in Rs) |
| Above Rs. 10,00,000 | 1,07,500 + 20% of the amount exceeding Rs. 10,00,000 | As per slab rate | 4% of the tax liability (in Rs) | As per slab rate + 4% of the tax liability (in Rs) |
Mr. X is a resident individual and falls under the 20% tax slab. He has invested in a REIT and received an amount of Rs. 2,00,000 as debt repayment. The calculation of the total tax will be as follows:
| Particulars | Amount (in Rs) |
|---|---|
| Debt Repayment Income | 2,00,000 |
| Taxable Income | 2,00,000 |
| Tax @ 20% | 40,000 |
| Cess @ 4% | 1,600 |
| Total Tax | 41,600 |
In this example, the total tax payable by Mr. X will be Rs. 41,600, which includes cess of Rs. 1,600.
Similarly, for individuals falling under different tax slabs, the total tax payable and the effective tax rate will be as follows:
| Tax Slab | Debt Repayment Income (in Rs) | Taxable Income (in Rs) | Tax @ Slab Rate (in Rs) | Cess @ 4% (in Rs) | Total Tax (in Rs) | Effective Tax Rate |
|---|---|---|---|---|---|---|
| 5% | 2,00,000 | 2,00,000 | 10,000 | 400 | 10,400 | 5.20% |
| 20% | 2,00,000 | 2,00,000 | 40,000 | 1,600 | 41,600 | 20.80% |
| 30% | 2,00,000 | 2,00,000 | 60,000 | 2,400 | 62,400 | 31.20% |
It can be seen from the above table that as the tax slab increases, the total tax payable and the effective tax rate also increases. The effective tax rate is calculated by dividing the total tax by the taxable income
"Union Budget 2023-24 announces that the dividend distribution by REITs will be taxed as other income in the hands of unitholders at a rate of 10% with an additional cess of 4% at prima facie." Clarity is still required from ministry office on that.
In conclusion, the Budget 2023-24 has brought about significant changes in the tax implications for REITs and Invits. The income generated from REITs and Invits will be taxed at the applicable slab rate along with the dividend distribution tax of 10%. The total tax payable will depend on the individual's tax slab, the amount of income generated from REITs and Invits, and the dividend income received.
In conclusion, the Budget 2023-24 has brought about significant changes in the tax implications for REITs and Invits. The income generated from REITs and Invits will be taxed at the applicable slab rate along with the dividend distribution tax of 10%. The total tax payable will depend on the individual's tax slab, the amount of income generated from REITs and Invits, and the dividend income received.
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Stock Market & Investing