CBDT amends norms, mandates detailed income disclosures for business trusts
Mumbai, Feb 26, 2025
For tax purposes, business trusts such as REITs, InvITs, and certain AIFs get pass-through status and are not taxed on the income earned by them
The government has amended income-tax norms to enhance transparency in reporting income distributed by trusts such as Alternative Investment Funds (AIFs), Real Estate Investment Trust (REITs) and Infrastructure Investment Trust (InvITs).
In a notification dated February 24, the Central Board of Direct Taxes (CBDT) introduced new reporting forms which will require detailed income disclosures. CBDT has also changed the timelines for filing the income statements from November 30 to June 15.
“Since the data of income to be furnished to the investors is linked to the aggregate income of the investment vehicle and the investor’s form has to be downloaded from government portal, it makes sense to advance the date for filing with the government before the information to be furnished to the investors,” said Sunil Gidwani, Partner, Nangia Andersen LLP.
For tax purposes, business trusts such as REITs, InvITs and certain AIFs get the pass-through status and are not taxed on the income earned by them. For such investments, investors are taxed directly on their share of income while the business trust issues a certificate disclosing their income.
The amended norms say that the statement of income is also to be filed online and the form furnishing to the unitholders are to be generated online.
Further, the new norms also mandate separate disclosure of dividend and income distributed on units.
“Dividend referred to in section 10(23FC) which in the new form is required to be disclosed separately for dividend paying companies who have optioned for a lower rate of tax at 22 per cent and the other companies. Similarly, income distributed on units referred in Section 56(2)(xii) is to be disclosed separately. This pertains to distribution more than the cost of the unit brought to tax effective last financial year,” explained Gidwani.
Industry experts said that the amendments reflect updates in the capital gains tax provisions under the Finance Act and simplify the language and disclosure norms.
“The recent income tax amendments which have streamlined reporting by entities such as real estate and infrastructure investment trusts and securitization trusts in greater detail is a step ahead for building a robust tax compliance system. We anticipate simplification and transparency as several forms stand updated in line with the applicable laws,” said Aurelia Menezes, Partner, King Stubb & Kasiva, Advocates and Attorneys.
The norms have been made effective from February 24.
[The Business Standard]
