New Delhi [India], August 7 (ANI): The Taxation and Other Laws (Amendment) Bill, 2026 is expected to benefit Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), but infrastructure companies under these trusts are likely to shift to the new tax regime gradually, according to a report by Share India Institutional Business.
The Bill, which was passed on Thursday, makes changes to the Income-tax Act, 2025, the Finance Act, 2026 and the Payment and Settlement Systems Act, 2007.
The report said one of the biggest changes is that dividends paid by Special Purpose Vehicles (SPVs) to REIT and InvIT investors will now be tax-free, regardless of whether the SPV follows the old or the new tax regime.
However, the report pointed out that SPVs choosing the new tax regime will have to pay a higher surcharge of 25 per cent, compared with the 10 per cent surcharge applicable to other companies.
Earlier, this tax exemption was available only if the SPV remained under the old tax regime.
According to the report, many infrastructure SPVs that enjoyed tax benefits under Section 80-IA of the Income-tax Act paid little or no regular corporate tax during their tax holiday period. Instead, they paid Minimum Alternate Tax (MAT) and built up MAT credits that they planned to use later.
Under the new rules, from FY2026-27, SPVs staying in the old tax regime will pay MAT at a reduced rate of 14 per cent. However, this tax will become the final tax liability, and no new MAT credits can be accumulated after April 1, 2026.
The report added that existing MAT credits can only be used after an SPV shifts to the new tax regime. Even then, only up to 25 per cent of that year’s tax liability can be adjusted using these credits.
“As a result, moving to the new tax regime is the only way for SPVs to use the MAT credits they have accumulated,” the report said.
It added that the shift to the new tax regime is likely to happen in phases rather than all at once.
Infrastructure SPVs that are still enjoying tax benefits under Section 80-IA and have only small MAT credits are expected to continue under the old tax regime because it remains more beneficial for them.
On the other hand, SPVs whose tax holiday has ended or those with large MAT credits are expected to move to the new tax regime as it offers a lower effective tax burden while allowing them to use part of their accumulated MAT credits.
The report said the number of SPVs shifting to the new tax regime is likely to increase over the next few quarters, and this could gradually increase costs for tax-exempt institutional investors. (ANI)
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