REIT, InvIT investors can benefit if trust switches income tax regime: Know how maximum effective tax rate of 34.94% under old tax regime comes down to 28.60% under new tax regime

The Lok Sabha approved the Taxation and Other Laws (Amendment) Bill, 2026 on August 6, 2026 which includes a significant amendment about tax laws of business trusts. For individual investors, this means that if they invest in REITs, InvITs or REIT, and the trust has chosen the new tax regime, the dividend will be tax-exempt. Previously, dividends were tax-exempt only if the trust had opted for the old tax regime.

Another positive update is that the maximum effective tax rate under the old tax regime is 34.94%, while under the new tax regime, it drops to 28.60% for REIT and InvIT trusts. This suggests that if the REIT, InvIT trust has such an internal structure that benefits from switching to the new tax regime, the respective REIT or InvIT can have more distributable cash for reinvestment or distribution to unitholders.