Govt brings listed equity & units of REITs, InvITs at par to calculate LTCG

The government on Tuesday brought units of listed business trusts -- REITs and InvITs -- at par with listed equity shares while calculating long-term capital gain tax, a move that will foster a more agile investment environment.

According to the Union Budget document, the government has reduced the holding period for determining long-term capital gains for business trusts from 36 months to 12 months.

"Thus units of listed business trust will now be at par with listed equity shares at 12 months instead of earlier 36 months," the document noted.

Real estate Investment Trusts (REITs) and infrastructure investment trusts (InvITs) are new concepts in the Indian market but have been a popular choice globally for their lucrative returns and capital appreciation.

A REIT is made up of a portfolio of commercial real estate assets, the majority of which are already leased out, and InvITs consist of a portfolio of infrastructure assets like highways.

Indian REITs Association, which has been formed by four listed REITs, welcomed the decision to reduce the holding period for determining long-term capital gains for business units.

"This change addresses a long-standing industry request and enhances liquidity in Indian REITs, making them more effective investment instruments. Previously, investors were required to hold units of business trusts for 36 months to qualify for the long-term capital gains tax rate. This extended holding period often acted as a barrier to investment flexibility and liquidity, particularly in the real estate sector," the association said.

"By shortening the holding period to just 12 months, the Union Budget fosters a more agile investment environment," it added.

Manish Satnaliwala, CEO, National Infrastructure Trust, said the move indicates the government's focus and commitment towards strengthening the infrastructure sector which is crucial for long-term economic growth and development.