New Tax Rules Boost Business Trusts in Budget 2024
The Union Budget for 2024 brings good news for the newer asset class of business trusts, which includes Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).
The newly announced budget aims to make the long-term holding period for tax considerations consistent with the rest of the equity market. This move is expected to benefit business trusts, providing them with uniform taxation and ensuring parity with equities.
IndIgrid CEO Welcomes Taxation Rationalization for Business Trusts
Harsh Shah, the CEO of infrastructure trust IndiGrid, welcomes the significant rationalization of taxation for business trusts in this Budget. With InvITs/REITs being taxed at the same rate as equities, investors will have the opportunity to invest in superior risk-adjusted platforms. Shah believes that this will also provide ample liquidity and enable InvITs and REITs to form part of indices.
Forming an Industry Body for Enhanced Reach
In order to enhance their reach and foster a collaborative environment, the four REITs currently listed in India have recently formed the Indian REIT Association (IRA). This industry body aims to promote the REIT asset class and work towards its further popularity in India.
Aravind Maiya, CEO of Embassy REIT, expresses great satisfaction with the budget announcement, recognizing its positive impact on Indian REITs. The reduction of the holding period for long-term capital gains from 36 months to 12 months brings REITs on par with listed equity shares. This move is expected to popularize the REIT asset class even further. Currently, there are around 2.3 lakh investors across all the four REITs, and this development is expected to significantly enhance investor participation.
Boosting Confidence in REITs
The Securities and Exchange Board of India (SEBI) chairperson, Madhabi Puri Buch, has expressed her admiration for REITs, considering them one of her “favorite products for the future.” Buch believes that combining REITs, InvITs, and municipal bonds will make them as large as India’s equity markets within the next 10-15 years. These positive sentiments from the highest regulatory authority instill confidence in the future growth of the business trusts sector.
As the budget provisions for business trusts gradually align their taxation with equities, it is expected that more investors will be attracted to participate in the growth potential of REITs and InvITs. These structures offer an opportunity to diversify investment portfolios, invest in high-quality assets, and experience steady yields.
Note: This news article is generated using a combination of given mixed text. While certain parts have been rephrased or padded to provide better context and readability, these adjustments do not change the original intent or meaning of the text.
