The last date to file your Income Tax Return (ITR) for Assessment Year (AY) 2026-27 is here, and if you’ve invested in Real Estate Investment Trusts (REITs) or Infrastructure Investment Trusts (InVITs), make sure you report this income correctly while filing your return.
This is important because income from REITs and InvITs isn’t taxed the same way in every case. The way you report it in your ITR depends on the type of income you’ve received.
For AY 2026–27, taxpayers should first check the distribution statement issued by the REIT or InVIT and then match it with the entries reflected in AIS and Form 26AS. The nature of each component matters, because a REIT or InVIT payout may include interest, dividend, rental income, or capital repayment, and each part is taxed differently.
If the distribution includes interest income, it is generally taxable in the hands of the unit holder and should be reported under the head “Income from Other Sources.” Dividend income is also reportable under the appropriate income head, depending on the taxpayer’s overall facts and applicable tax rules. Any amount shown as capital repayment is generally not taxed as income, but the investor should still keep the statement as supporting proof.
If the taxpayer sells REIT or InVIT units during the year, any profit or loss on sale should be reported under capital gains in the relevant schedule of the ITR. The correct capital gains treatment will depend on the holding period and the applicable tax rules for that year. Therefore, taxpayers should not mix the distribution income with sale proceeds, since these are two separate reporting items.
“In most cases, salaried individuals and investors with REIT or InVIT income may file ITR-2, unless they also have business or professional income, in which case ITR-3 or 4 may be required. The key is to choose the form based on the taxpayer’s complete income profile, not just the REIT or InVIT income alone,” said CA Chandni Anandan, Tax Expert at ClearTax.
Before filing, taxpayers should keep the quarterly or annual distribution statement, broker or demat statement, AIS/26AS entries, and sale contract notes if units were sold. Matching the return with these records helps avoid notices, mismatches, and refund delays. In short, the safest approach is to split REIT and InVIT income by component, report each under the correct head, and verify the numbers against the official statements before submitting the ITR.
Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws and regimes are subject to frequent changes by the government. Readers should verify details with official Income Tax Department notifications or consult a Chartered Accountant before making any financial decisions.
Every financial journey has a turning point. What’s yours?
Financial Express is launching a new series highlighting real experiences with money, investments, and the taxman. Did a sudden tax rule catch you off guard? Did a piece of financial advice change your life? Your story could provide invaluable, practical lessons for thousands of fellow taxpayers. Share your experience with us. We respect your privacy: no stories will be featured without a direct conversation and your full consent. Thank you.