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A real estate investment trust (REIT) receives a dividend from its qualifying special purpose vehicle (SPV) and distributes that dividend to its unit holders. Which statement describes the relevant…

Question and options

A real estate investment trust (REIT) receives a dividend from its qualifying special purpose vehicle (SPV) and distributes that dividend to its unit holders. Which statement describes the relevant exemptions under the Income-tax Act, 2025?

  1. The dividend is exempt for the REIT and for unit holders regardless of the SPV’s section 200 option.

  2. The dividend is taxable for the REIT and for unit holders regardless of the SPV’s section 200 option.

  3. The dividend is taxable for the REIT and exempt for unit holders if the SPV exercised the section 200 option.

  4. The dividend is exempt for the REIT and is exempt for unit holders only if the SPV did not exercise the section 200 option.

Answer and explanation

Correct answer: D - The dividend is exempt for the REIT and is exempt for unit holders only if the SPV did not exercise the section 200 option.

Schedule V, item 3(b), of the Income-tax Act, 2025 exempts a business trust on dividend received from its special purpose vehicle. Item 5 exempts the distributed income in the unit holder's hands, but not the part that is of the nature of such dividend where the special purpose vehicle has exercised the section 200 option. So the dividend is exempt for the REIT, and exempt for unit holders only if the SPV has not opted for section 200.

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