The SPVs earn rental income, pay the outgoings of the properties, pay taxes on their incomes and pay interest and dividends to the Reit. The SPVs earn transmission income or toll, and in turn pay interest, dividends and repayment of debt to the InvIT. The SPVs pay tax on their respective taxable income, which is computed after deducting all allowable expenses (including interest paid to the Reit/InvIT) from the gross income earned by way of rent, transmission fees or toll and investment income such as bank interest or mutual fund income. A Reit/InvIT would pay tax only on its capital gains and other interest and investment income, other than income earned from the SPVs. Rental income of the Reit is exempt in its hands, but taxable in the hands of the investors.

Source: Mint May 24, 2021 16:41 UTC