REIT and InvIT Taxation for NRIs: ITR Filing Guide AY 2026-27

Comprehensive Tax Framework & Practical NRI ITR Filing Guide for AY 2026-27

This analysis will help NRI investors understand whether NRI investors need to file a tax return, in India to claim a refund of over‑deduction of TDS. This analysis will also explain how taxation of REITs and InvITs takes place in India for AY 2026‑27 and will give steps for filing NRI ITR.

NOTICE UNDER THE INCOME-TAX ACT, 1961 FOR AY 2026-27

Section 115A offers a return-filing exemption only if tax was deducted strictly at standard rates and you don't intend to claim a refund. If excess tax was withheld or if you plan to benefit from lower DTAA treaty rates under Section 90, filing an ITR-2 is the only legal way to get that refund credited to your account.

Do Non-Residents Need to File ITR in India for REIT/InvIT Distributions?

When unitholders ask Do non residents need to file ITR in India, the short answer is: it depends on whether you want your money back. While Section 115A exempts non-residents who have had the exact statutory tax deducted, preparing an ITR for non residents usually becomes necessary for the following practical reasons:

• Reclaiming Excess TDS: Business trusts deduct tax under Section 194LBA at standard statutory rates frequently 30% plus surcharge and cess on rental payouts. If your actual tax bracket or treaty rate is lower, filing an ITR is the only way to get that difference refunded.

• Taking Advantage of DTAA Relief: Under Section 90 of the Income Tax Act 1961, non-residents can tap into lower tax rates (often 5% to 15% on interest or dividends) available under Double Taxation Avoidance Agreements. Since trust managers rarely apply treaty rates directly at payout time, you have to claim this benefit when filing your return.

• Selling Units on the Exchange: If you bought or sold REIT or InvIT units on an Indian stock exchange during the financial year, those transactions trigger capital gains that must be declared in Schedule CG.

• Accounting for 'Specified Sums' under Section 56(2)(xii): When distributions labelled as debt repayments or return of capital go beyond your original unit purchase cost, the excess becomes taxable and must be reported under Income from Other Sources.

Business trusts use a pass-through structure under Section 115UA, meaning tax treatment depends on the exact nature of each payout component. Here is how tax on REIT distributions interest dividend rental applies under the Income Tax Act 1961 for AY 2026-27:

 

Follow these clear steps to organize your paperwork and reclaim excess NRI income tax for AY 2026-27:

Step 1: Gather Your Tax Statements

• Form 64B: Grab this annual statement from your trust manager—it breaks down exactly how much you received in interest, dividends, rent, and capital returns.

• Form 26AS & AIS: Log into the e-filing portal and download your Annual Information Statement (AIS) along with Form 26AS to cross-check all tax deducted at source.

Step 2: Choose Form ITR-2

In case the foreign individual is making income out of any business trust payment or capital gains, he should fill out the ITR-2 form (ITR-3 in case of professional unit trading). One thing to remember here is that the easy form, i.e., ITR-1/ITR-4 cannot be used by non-resident individuals.

Step 3: Prepare DTAA Treaty Documentation

Check whether your home country has a tax treaty agreement with India to pay less tax. In order to get the tax benefits under section 90, you need to have a Tax Residency Certificate (TRC) issued by your home country.

Step 4: Fill Out the Key Schedules in ITR-2

• Schedule OS: Enter your interest, rental, and taxable return-of-capital figures here.

• Schedule CG: Report any gains or losses from selling units on Indian stock exchanges.

• Schedules FSI & TR: Detail your foreign residency status and enter treaty relief figures claimed under Section 90.

• TDS Schedule: Verify that every rupee of tax deducted matches Form 26AS so you get full credit.

Step 5: Verify and Set Up Direct Refund Transfer

Make sure your pre-validated NRO bank account (or eligible foreign account) is selected to receive the credit. Complete electronic verification (EVC) using net banking or an Aadhaar OTP within 30 days of submitting your return to avoid processing delays.

For non-resident investors, REIT and InvIT investments can provide attractive opportunities to earn income from Indian real estate and infrastructure assets. However, the tax treatment of distributions depends on the nature of the income, applicable withholding provisions, and the investor’s residential and treaty position.

While TDS may be deducted on various components of REIT/InvIT distributions, the amount deducted may not always represent the investor’s final tax liability. Therefore, where excess TDS has been deducted or DTAA relief is being claimed, filing an Indian income tax return becomes important to correctly report the income, claim eligible treaty benefits and obtain a refund of excess tax deducted.

Non-resident investors should accordingly maintain Form 64B, Form 26AS, AIS, TRC, Form 10F and other relevant tax documentation and reconcile the distribution and TDS details before filing the return. A properly prepared ITR not only facilitates refund claims but also ensures that income from distributions and capital gains is reported in accordance with the applicable tax provisions.

In short, understanding the character of REIT/InvIT income and correctly reporting it in the ITR is essential for non-resident investors to avoid excess taxation and effectively claim refunds or available DTAA benefits.