Many of us got so confused after hearing the name of ‘Business Trust’. There are so many doubts in the mind of people relating to this concept. Hence today I am come up with this most demanded topic of Business Trust.

Govt introduced the concept of Business Trust by Finance Act, 2014. In India, Business Trust would operate as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). Real Estate Investment Trusts (REITS) have been successfully used as instruments for pooling of  investment in several countries. REITs were created in the United States in 1960. Since then, many countries around the world have established REIT regimes.

Business Trust

Section 2(13A) of Income Tax Act defines Business Trust as below:

[Note: This is an amended definition by Finance Act, 2020]

(13A) “business trust” means a trust registered as,—

 (i)  an Infrastructure Investment Trust under the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); or

 (ii)  a Real Estate Investment Trust under the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992)


Business Trust= Real Estate Investment Trusts (REITs) + Infrastructure Investment Trusts (InvITs).

These trusts are like mutual funds that raise resources from many investors to be directly invested in realty or infrastructure projects. The income-investment model of REITs and InvITs (referred to as business trusts) has the following distinctive elements:

  • the trust would raise capital by way of issue of units (to be listed on a recognized stock exchange) and can also raise debts directly both from resident as well as non-resident investors;
  • The income bearing assets would be held by the trust by acquiring controlling or other specific interest in an Indian company (SPV) from the sponsor.

The Securities and Exchange Board of India (SEBI) has notified regulations relating to two new categories of investment vehicles namely, the Real Estate Investment Trust (REIT) & Infrastructure Investment Trust (InvIT) on 26th September, 2014. These are SEBI (Real Estate Investment Trusts) Regulations, 2014 and SEBI (Infrastructure Investment Trusts) Regulations, 2014.

The important amendment made by Finance Act, 2020 in definition of Business Trust is that the business trusts earlier can recognised only listed InvITs and REITs registered with SEBI but now it includes unlisted InvITs and REITs registered with SEBI as well. This amendment will take effect from April 1, 2020.

Real Estate Investment Trusts (REITs)

Real Estate Investment Trust (REIT) is a trust that owns and manages income generating developed properties and offers its unit to public investors. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even timberlands.

Globally, REITs invest primarily in completed, revenue generating real estate assets and distribute major part of the earning among their investors. Typically, most of such investments are in completed properties which provide regular income to the investors from the rentals received from such properties.

  • REITs are principally expected to invest in completed assets. Income would consist of rental income, interest income or capital gains arising from sale of real assets / shares of SPV.
  • REITs are managed by professional managers which usually have diverse skill bases in property development, redevelopment, acquisitions, leasing and management etc.
  • Listed REITs provide liquidity, thus providing easy exit to the investors.

Structure of REITs :

Structure of REITsInfrastructure Investment Trusts(InvITs)

Infrastructure Investment Trusts make direct investment in infrastructure facilities which are yielding income e.g. Toll Road, Railways, Inland waterways, Airport, Urban public transport. InvITs will allow infrastructure developers to monetize specific assets, helping them use proceeds for completing projects of theirs stalled for want of funds.

Structure of InvITs is quite similar to REITs. The main difference is InvITs make investment into infrastructure facilities whereas REITs make investment in commercial real estate properties.

It will be interesting to see in future how India’s real estate sector will be affected by these investment vehicles.

(Author can be reached at Mobile: +91-888-282-8112 Email-ID: [email protected])
(Republished with Amendments by Team Taxguru)

Author Bio

Qualification: CA in Practice
Company: Tarun Harish Kumar & Co.
Location: Delhi, New Delhi, IN
Member Since: 25 Apr 2017 | Total Posts: 42
A passionate Chartered Accountant having practical exposure of working with the Start-ups and NGOs. I also do have an interest in blogging and teaching. I am active blogger and authored various blogs on Taxation matters, that have been published in the print media and leading newspapers as well as w View Full Profile

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  1. Nihit Jhaveri says:

    Nice Article. But one thing, which I would want to have a clarity on is that ‘What would be the Legal Status of a Business Trust?’, Will it be considered as a Company, or it’ll be an AOP? This is basically to through a light on two aspects, namely: (a.) the applicability of MAT, and (b.) the rate of Surcharge on incomes of Business Trusts which are not taxable at MMR ie LTCG u/s 112 (taxable at 20% or 10%) and STCG covered by Section 111A.

  2. satyam says:

    bro… u made me to understnd tax easily… i think u r admin of this pwebsite..great knowledge and great work… plz write on gst

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