Skip to main content

New REIT Regulations

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

Recently, the Sec u r i t i e s and Exchange Board of India's Chairman, UK Sinha said that if Reits have to succeed, they will have to be taxefficient.

 

He further said he will ask tax- authorities to consider tax incentives for real estate investment trusts. Well talk to the  I- T department to make it happen.

 

The proposed introduction of the new guidelines for Real Estate Investment Trusts (REITs) has been considered as a move that will enable more investors to get an exposure to real estate as an asset class. But the expectations could be hampered by the fact that at the moment a key part of the entire guideline remains unclear. This is the taxation aspect of the whole Reit transaction because for a normal investor the final returns at the end of the day matter. Investors in Reit would like some favourable tax treatment so that this remains an attractive route for them to put money as compared to other options present in the market.

Indirect impact

 

There are two angles to the entire Reit taxation workings. The first is that the Reit structure has to be tax efficient otherwise it would not be profitable for the investor to actually put money into the instrument.

Even though this angle deals with taxation for the Reit and the income that it earns, it has an indirect impact for the investor because if the returns earned by the Reit get eaten away due to the higher taxes they would not reach them in a fully efficient manner.

 

The requirement is that the Reits should get a pass through status so that the tax impact is limited and hence this will be beneficial to the investor. Till this is clear it is likely that there will not be any launch of Reits in India. There are other angles related to the taxation of the individual that are also important and will be a factor in determining the interest of the investor in the entire issue.

 

Dividends

 

Dividends received by the investor from companies as well as mutual funds are tax free in their hands. Now Reits will enter the fray as a separate instrument so the question is whether the taxation of the dividend received from this instrument will be liable for the same treatment as witnessed for dividends. If this is not the case then the amount received would have to be taxed in the hands of the investor which would put a burden on them.

The burden for this can be higher due to the fact that if the amount is included in the income of the individual like any other figure then the taxation would be at the rate or slab under which the investor falls under. So you could find that there are investors who end up with a tax rate of 30 per cent plus and this could be a big disincentive. The nature of the proposed Reits is such that the initial investors are most likely to be high net worth investors who would naturally fall into the higher tax bracket.

 

Dividend distribution tax

 

There could be a dividend distribution tax that could be payable by the Reit on the declaration of dividends. Since 90 per cent of the income earned by the Reit has to be paid out it is important for the individual to ensure that the tax impact is negligible otherwise the net impact could turn out to be corrosive on the overall returns. The dividend distribution tax ultimately has to be paid by the individual in the fund so this would need to be considered in the overall calculation of the cost.

 

Capital gains benefit

 

There are favourable conditions related to the investments into equities and mutual funds when it comes to capital gains earned on these instruments.

 

For direct equities or equity oriented mutual funds the benefit is that if they are held for a period of more than 12 months then the long term capital gains tax that would have to be paid on this would be zero. In case of the Reit there is no clear guidelines on what would actually be considered as the nature of the that it will be listed will provide investors with an option to actually trade in them, if the security transaction tax has to be considered. This would be linked to the benefit of a lower capital gains tax otherwise there could be a position where the individual ends up being penalised for utilising one of the features of the instrument. Here there is a larger question involved which is that the Reit would also have to be classified as an approved security under the Securities Contract Regulation Act. Overall In the absence of clarity of tax matters on these issues, there is very little chance that an investor is going to be attracted towards a Reit in the form that has been proposed. The entire effort of earning returns in the investment could be negated by the tax position. This tax angle will be key before investors invest in them. Unless there is a beneficial way in which this is actually dealt with it could turn sentiment against Reits which could be difficult to correct at a later stage hence the important thing is to get the details right the first time around.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Rs 14,000 Crore worth of tax free bonds coming soon from NHAI , PFC

  NHAI, PFC file prospectuses, coupon rate not yet decided MORE debt investment options have opened up for investors with AAA rated tax-free bonds worth over Rs 14,000 crore lined up. The National Highway Authority of India ( NHAI ) and Power Finance Corporation ( PFC ) are offering Rs 10,000 crore and Rs 4,033.13 crore worth of tax-free bonds, respectively, as per prospectuses filed with the Securities and Exchange Board of India (Sebi). Of a Rs 5,000 crore issue by PFC, Rs 966.87 crore has already been raised through private placement on September 28 and November 1. Tax-free bonds give investors tax-free return on any amount invested. In another kind of bonds, the long-term infrastructure bonds, investments up to Rs 20,000 are tax exempt, that is this cap amount can be deducted from the taxable income. Accordingly, the NHAI prospectus has clarified that only the amount of interest from -and not the actual investment on -its new bonds will be tax-free. "NHAI's publ...
Read more

Change in Fund Manager for some of HSBC Mutual Fund Schemes

Buy Gold Mutual Funds Invest Mutual Funds Online Download Mutual Fund Application Forms Call 0 94 8300 8300 (India) However, this facility is only available to Unit holders who have been assigned a folio number by the AMC.   HSBC Mutual Fund has announced that the below mentioned schemes shall be managed by the new fund managers as stated in the table. The effective date will be July 02, 2012.   Amaresh Mishra 's will be Vice President and Assistant Fund Manager. Having done a Post graduate diploma in Business Management and Bachelor of Chemical Engineering, he has over seven years of experience in Equities and Sales.   Mr. Piyush Harlalka's designation shall be Vice President- Fixed Income. Qualified as a C.A., C.S. and holding M.B.A.( Finance degree), he has over six years of experience in Fund management and ...
Read more

How EEE and EET Tax affect Retirement Investments

  An important factor while choosing a financial product is its taxation , and for retirement savings, this is even more important as the sums involved are usually life-long savings. Here's a look at the current tax treatment of three major long-term retirement planning products, which are - Employees' Provident Fund (EPF), Public Provident Fund (PPF) and National Pension System (NPS). EPF The tax treatment is EEE, which means your money is exempt from taxes at the time of investment, accumulation and withdrawal. At the time of investment, the tax deduction is under the limit of section 80C of the Income-tax Act , which is currently Rs 1.5 lakh. Partial withdrawals are also tax-free if made after 5 years of continuous service. If withdrawals are made before 5 years of service, 10% tax will be deducted at source. Exceptions have also been provided for transfer of amount and conditions wherein the subscriber is unemployed for more than 2 months or the loss of job was beyond th...
Read more

Personal Finance: You can insure your wedding

But luck may not always be on your side. With the frequency of such attacks, as also other risks and unforeseen accidents growing, a wedding insurance is something you may want to look at if a marriage is being planned in the family. Event insurance plans like this is still in its nascent stages due to low awareness. And given the sacred nature of the ritual, nobody wants to discuss or think negative. But as wedding spends and risks grow, it makes sense to cover the potential monetary loss. The policy in those countries even covers the loss of the wedding ring, the wedding gown not reaching on time and even the expenses/loss due to late or non-appearance of the photographer which may mean staging the event once again for the photograph. In India, most insurance companies — including ICICI Lombard General Insurance, Oriental Insurance, Bajaj Allianz and National Insurance — offer wedding insurance. The policy is tailor made to individual requirements and needs. The sum insur...
Read more

DSP BlackRock MidCap Fund

Best SIP Funds Online   HOW HAS DSP BlackRock Small & Mid Cap Fund PERFORMED? With a 10-year return of 14.61%, the fund has outperformed both the category average (12.34%) and the benchmark (10%) by a good margin. Should you invest in DSP BlackRock Small & Mid Cap Fund? This fund invests predominantly in mid-cap stocks but takes a sizeable exposure in small-caps as well. The focus is on nascent companies with high growth potential. The fund manager places emphasis on quality and avoids inferior businesses even if these look tempting from a valuation perspective. Over the past year, the fund portfolio has grown, having added to some of the underperforming sectors like chemicals and healthcare. Its portfolio churn has come down significantly. The heavily diversified portfolio is run completely agnostic of its benchmark index— most bets are from outside the index—which can at times lead to bouts of underperformance as seen in the recent years....
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now