Realty MFs' income to be out of tax net
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K.Karthik Raja
Mar 31, 2008, 7:24:10 AM3/31/08
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Realty MFs' income to be out of tax net
31 Mar, 2008, 0300 hrs IST,
MUMBAI/HYDERABAD: The uncertainty over the tax-treatment of real
estate mutual funds is set to end soon. The government will exempt
from tax the income generated by mutual funds which float schemes
which aim to invest mainly in the stocks of realty firms. According to
a senior revenue department official, real estate MFs and other MFs
that invest in shares of realty companies will be spared of paying tax
on all income. The dividend income of unit holders who buy these
products to reap the gains of a realty boom will also be tax-free.
"Sebi-registered real estate mutual funds will be given a tax pass-
through status if they invest the money raised from investors in
shares of real estate companies. So will be the case for all mutual
funds investing in shares of realty companies," said the official.
Securities market regulator Sebi had approved the launch of real
estate mutual funds almost two years ago. But the operational
guidelines or norms are yet to be unveiled. Now, with greater clarity
on valuation norms and the calculation of net asset value (NAV), the
regulator may soon prepare the ground for the launch of real estate
MFs, an official said.
Real estate MFs are expected to be close-ended, and the units of these
funds will be listed on the exchanges. Such funds invest in both
listed and unlisted securities of realty firms. They offer an
opportunity to investors to take an exposure to a sector which offers
reasonably attractive capital gains and steady dividend income.
However, the Reserve Bank of India (RBI) has not been comfortable with
more investment flowing into realty given the dangers of an asset
price bubble.
While real estate mutual funds will stand to gain due to favourable
tax treatment, Real Estate Investment Trusts (REITs) that directly buy
and sell property including apartments and shopping malls could be
denied such benefits, a senior revenue department official said.
K.Karthik Raja
31 Mar, 2008, 0300 hrs IST,
MUMBAI/HYDERABAD: The uncertainty over the tax-treatment of real
estate mutual funds is set to end soon. The government will exempt
from tax the income generated by mutual funds which float schemes
which aim to invest mainly in the stocks of realty firms. According to
a senior revenue department official, real estate MFs and other MFs
that invest in shares of realty companies will be spared of paying tax
on all income. The dividend income of unit holders who buy these
products to reap the gains of a realty boom will also be tax-free.
"Sebi-registered real estate mutual funds will be given a tax pass-
through status if they invest the money raised from investors in
shares of real estate companies. So will be the case for all mutual
funds investing in shares of realty companies," said the official.
Securities market regulator Sebi had approved the launch of real
estate mutual funds almost two years ago. But the operational
guidelines or norms are yet to be unveiled. Now, with greater clarity
on valuation norms and the calculation of net asset value (NAV), the
regulator may soon prepare the ground for the launch of real estate
MFs, an official said.
Real estate MFs are expected to be close-ended, and the units of these
funds will be listed on the exchanges. Such funds invest in both
listed and unlisted securities of realty firms. They offer an
opportunity to investors to take an exposure to a sector which offers
reasonably attractive capital gains and steady dividend income.
However, the Reserve Bank of India (RBI) has not been comfortable with
more investment flowing into realty given the dangers of an asset
price bubble.
While real estate mutual funds will stand to gain due to favourable
tax treatment, Real Estate Investment Trusts (REITs) that directly buy
and sell property including apartments and shopping malls could be
denied such benefits, a senior revenue department official said.
K.Karthik Raja
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