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Foundation laid for real estate trusts

Mumbai, July 10: Finance minister Arun Jaitley today kick-started the much awaited process towards the launch of real estate investment trusts (REITs) in the country when he announced tax pass-through status for these entities.

REITs are similar to mutual funds in that they raise money from investors and put them into real estate assets that may comprise of commercial projects like office buildings or malls apart from housing complexes as well. These assets are held in an entity (SPV) which is under control of the trust.

Investors in REIT earn on account of both dividend (from the rent collected) and wealth accumulation (capital appreciation of the underlying property). The rent collected is subsequently paid to investors as dividend.

“I intend to provide necessary incentives for REITS which will have pass through for the purpose of taxation,” union finance minister Arun Jaitley said while announcing the 2014-14 Budget today.

The tax pass-through status, according to the ministry of finance, will mean that the income by way of interest received by the REIT will not be taxed in the hands of the trust.

 
 
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