Mr. Ricardo, a non-resident holding 10% of the units of a REIT, earned the following income distributed by the REIT during the P.Y.2025-26: (i)…

The REIT enjoys pass-through status in respect of rental income from real estate asset owned by it directly, interest income and dividend from special purpose vehicle, (i.e., Grey Ltd., in this case, since it is an Indian company in which REIT holds controlling interest). Therefore, rental income from real estate asset owned by it directly and interest income is taxable in the hands of the unit holders. In respect of dividend income from special purpose vehicle, REIT enjoys pass-through status. However, if SPV is not opting for the provisions of section 115BAA, the dividend income component would be exempt in the hands of the unit holder. If the SPV is exercising the option under section 115BAA, dividend income component would be taxable in the hands of unit holder. Any specified sum received by a unitholder from a RIET would be chargeable to tax in the hands of unitholder as "Income from other sources". (1) Rental income component of income distributed by REIT: The distributed income or any part thereof, received by Ricardo from the REIT, which is in the nature of income by way of renting or leasing or letting out any real estate asset owned directly by such REIT is deemed income of the unit-holder as per section 115UA (3) . Accordingly,2,51,000 would be deemed income of Ricardo as per section 115UA (3) . The REIT has to deduct tax at source under section [email protected]% (being the rate in force) in case of distribution to Ricardo, being a non-resident. (2) Interest component of income distributed by REIT: Interest component of income received from a special purpose vehicle, Grey Ltd., in this case, and distributed to a unit holder is taxable in the hands of the unit holder. Accordingly, such interest component of 86,000 is taxable in the hands of Ricardo. The REIT has to deduct tax at source under section 194LBA @5.2%, on 86,000, since Ricardo is a non-resident. (3) Dividend component of income distributed by REIT: By virtue of section 10(23FD),42,000, being the dividend component of income distributed to Ricardo would be exempt in his hands. Therefore, there is no liability on the REIT to deduct tax at source on the dividend component of income distributed by it to Mr. Ricardo. However, if Grey Ltd. has exercised option under section 115BAA, then, the dividend income distributed by it would be subject to tax in the hands of the unitholders. Accordingly,42,000 is taxable in the hands of Mr. Ricardo. The REIT has to deduct tax at [email protected]% on 42,000, since Mr. Ricardo is a non-resident. (4) Specified sum distributed by the REIT: Any sum other than interest, dividend received from SPV, rental income and income which are chargeable to tax in the hands of REIT, would be chargeable to tax under section 56 (2) (xii) in the hands of unitholders as income from other sources. Accordingly, in the present case,5,00,000 [20lakhs, being 10% of 2crores Less 15lakhs, being the issue price of units held by Mr. Ricardo would be taxable as Income from other sources. On such sum, no tax is required to be deducted at source by the REIT.