Will the Taxation (Amendment) Bill 2026 Change REIT Tax Benefits for Investors?

If you invest in REITs or InvITs, the Taxation and Other Laws (Amendment) Bill, 2026 could bring an important change to how your dividend income is taxed. The proposed legislation seeks to restore dividend tax exemption for eligible business trust investors while introducing a higher surcharge for the underlying entities that distribute those dividends.

Beyond REITs, the Bill also proposes tax reforms aimed at boosting manufacturing, supporting India's growing data centre industry and making the country a more attractive destination for global investment funds.

What Could Change for REIT and InvIT Investors?

One of the key proposals in the Bill is the restoration of dividend tax exemption for unit holders of business trusts, including REITs and InvITs, provided the underlying Special Purpose Vehicle (SPV) has opted for the new tax regime.

To balance the tax relief, the government has proposed an additional 15% surcharge on these SPVs. While the surcharge will apply at the entity level, the overall objective is to simplify the tax framework and ensure investors continue to receive tax-efficient dividend payouts.

For investors, the proposal could make the tax treatment of REIT and InvIT income easier to understand if the Bill becomes law.

The Bill Goes Beyond REITs

The proposed legislation also includes measures aimed at strengthening India's manufacturing and digital infrastructure.

Tax exemptions for foreign companies supplying machinery, tooling and capital equipment to contract manufacturers in customs bonded areas have been extended until FY2040-41. Similar benefits have also been proposed for foreign companies storing components in bonded warehouses, particularly for electronics such as mobile phones, laptops, servers and wearables.

The Bill also seeks to ease compliance for foreign cloud service providers and Indian data centres by removing certain approval requirements and allowing more flexible leased operating models.

Simpler Tax Rules for Global Funds

Another notable proposal is the simplification of tax rules for offshore investment funds. The government plans to reduce the eligibility criteria from 13 conditions to just 5, making it easier for foreign fund managers to operate from India without exposing their overseas funds to unintended domestic tax liabilities.

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Conclusion

The Taxation (Amendment) Bill, 2026 is about more than just tax changes—it is an effort to make India's tax system simpler and more investment-friendly. While the proposed REIT and InvIT amendments are likely to be closely watched by income-focused investors, the wider reforms could also support manufacturing, digital infrastructure and foreign capital over the long term.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities and commodities mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion before making investment decisions. 

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.