How REIT and InvIT distributions are taxed
A trust distribution is not one thing. It arrives as a single figure per unit but is made of parts that the tax system treats completely differently, which is why two trusts with the same yield can leave you with very different amounts.
The four components
Interest is taxed at your slab rate. It is usually the largest part of an InvIT distribution.
Dividend is exempt in your hands — unless the underlying SPV opted into the concessional corporate tax regime under section 115BAA, in which case it is taxable. This varies by trust, and even between trusts holding similar assets.
Repayment of capital is not income at all. It is not taxed when received; instead it reduces your cost of acquisition, so it increases your capital gain whenever you eventually sell (section 72(4) of the Income-tax Act 2025, formerly Explanation 1 to section 48).
Amortisation of SPV debt is treated the same way. Since the Finance Act 2023 both count toward one running total per unit: while the capital returned on a unit, across every year you have held it, stays within the price the trust issued that unit at, it only reduces your cost. The excess above the issue price is taxed at your slab rate as income from other sources — section 92(2)(k) of the Income-tax Act 2025, formerly section 56(2)(xii).
Why the split matters more than the yield
A 10% yield that is mostly repayment of capital is not 10% of income — a large part of it is your own money coming back, with a deferred tax consequence attached.
The mix also moves between quarters for the same trust, so last quarter's breakdown is not a reliable guide to this one.
Where to find it
Where a trust publishes the breakdown in its exchange filing, every distribution on this site shows its own component table with the treatment of each part. Around 93% of distributions carry it.
When a trust states only a total, we say so rather than estimating a split.
Common questions
- Is REIT income taxable in India?
- Partly. The interest component is taxed at your slab rate and the dividend component is usually exempt. Repayment of capital and amortisation are not taxed on receipt — they reduce your cost of acquisition — until their running total on a unit exceeds the unit's issue price; only that excess is taxed, as income.
- Why is my REIT payout lower than the yield suggested?
- Because the yield is a pre-tax figure across all components. Once interest is taxed at your slab rate, what you keep is lower — and part of the rest may be your own capital returned.
General information about how the rules work, not tax or investment advice. Rates and thresholds change with each Finance Act — check the current position for your situation.