According to CA Abhishek Soni, CEO and Co-founder of Tax2win, most investors who only receive REIT/InvIT payouts like interest and dividend can file ITR-1 if they meet the eligibility conditions. However, investors who sell REIT/InvIT units and have capital gains generally need to file ITR-2, as this form can be used to report investment-related income, including capital gains arising from unit sales. Before selecting the ITR form, taxpayers should review their complete income details for the financial year. With the 31 July deadline approaching, taxpayers have just four days to submit their income tax returns for AY 2026-27.
As reported by Tax2win, income from REITs and InvITs must be reported in ITR based on the type of income received. Dividend income and interest income should be reported under 'Income from Other Sources', which are usually taxed according to the investor's income tax slab. If investors receive any tax-exempt distribution, it should be reported under the 'Exempt Income' schedule. If they sell REIT or InvIT units, the profit or loss should be reported under the 'Capital Gains' schedule, with taxation depending on how long the units were held. Distributions from REIT or InvIT may include interest, dividends, rental income, capital repayment or a mix of these, each component being taxed differently. Each type of receipt requires careful review of the trust's distribution statement before filing to avoid inaccurate calculations.
According to the guidance, REIT and InvIT investors should keep several documents handy before filing their return. These include the REIT/InvIT distribution statement, broker transaction records, Annual Information Statement (AIS), Form 26AS, purchase and sale details of units, and bank statements showing receipts. Investors should carefully review the distribution statement provided by the REIT or InvIT before submitting their ITR for AY 2026-27. Ensure these records match the income reported on the return to help avoid discrepancies, errors or omissions and reduce the chances of notices or delayed refunds.
As reported, REITs and InvITs allow investors to participate in income-generating real estate and infrastructure assets without directly owning them. Money collected from investors is pooled at the trust level and invested through Special Purpose Vehicles (SPVs), which own and operate the underlying assets. REITs primarily invest in commercial real estate assets such as office spaces and malls, while InvITs focus on infrastructure assets including roads, power transmission networks, and renewable energy projects.
According to Tax2win, taxation of REITs and InvITs is governed by Section 115UA of the Income Tax Act, following a pass-through taxation structure. Interest income is taxed according to the investor's applicable income tax slab, while rental income and dividend components from REITs may have specific tax treatment depending on applicable provisions. For non-resident investors, taxation may depend on applicable provisions, including the Double Taxation Avoidance Agreement (DTAA), wherever applicable. REITs and InvITs follow a pass-through taxation framework, meaning the tax treatment depends on the nature of the income received rather than on the investment itself.
