Long term capital gains tax: CII pitches for reduction in REITs/InvITs units’ holding period to one year

K.R.Srivats | | Updated on: Dec 08, 2021
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Currently, investments in REITs and InvITs units turn long-term only on holding them for a minimum of 36 months

The Confederation of Indian Industry (CII) has urged the government to make business trusts like REITs and InvITs even more attractive for both foreign and domestic investors. This can be done by bringing down the period of holding for units in REITs and InvITs to be classified as long term to 12 months at par with listed securities, the CII recommended in its pre-budget memorandum submitted to Finance Ministry.

Currently, investments in units of REITs and InvITs turn long-term only on holding the investment for a minimum of 36 months as against a period of 12 months prescribed for investment in listed securities. Such long period disincentivises investors from considering investment through business trusts given the higher tax rate attracted when the gains are short-term in nature, the CII has said.

The industry chamber has pointed out that REITs and InvITs are envisaged to play major role in success of government’s ‘National Monetisation Pipeline’ of ₹ 6 lakh crore.

The holding period for direct holding of immovable property and shares of unlisted companies is two years whereas indirect holding through REITs/InvITs is three years resulting in tax distortion, the CII

“To increase the attractiveness of such investment for both foreign and domestic investors, it should have same treatment as listed equity instruments”, the CII pre-budget memorandum said.

Indian REITs/InvITs are now an integral part of the capital market ecosystem and with multiple successful fund raises, India has now established itself as a successful REIT/InvITs market. Also, recently the Gift-City regulator IFSCA has now allowed globally established REITs and InvITs to list themselves in the International Financial Services Centre in India.

Meanwhile, in a separate recommendation, CII has also suggested that the tax rates on dividends for residents should be brought down in line with the regime available for non residents.

Published on December 08, 2021

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