Compilation of “Frequently asked Questions” (‘FAQ’s) on the income-tax treatment for
distributions by the Embassy Office Parks Real Estate Investment Trust (‘Embassy REIT’) in the
hands of the Unitholders under the Indian Income-tax Act, 1961 (‘the Act’) read with the Income -tax
Rules, 1962 (‘the Rules’) [collectively referred to as ‘Indian income-tax law ’]
Applicable for Financial Year 2022-2023 i.e. Assessment Year 2023-2024.
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BY READING THIS FAQ THE RECIPIENT ACKNOWLEDGES THAT THE RECIPIENT WILL BE SOLELY
RESPONSIBLE FOR ITS OWN ASSESSMENT OF THE TAX POSITION OF THE UNITS HELD IN THE
EMBASSY REIT. THIS FAQ MAY NOT BE ALL INCLUSIVE AND MAY NOT CONTAIN ALL OF THE
INFORMATION THAT THE RECIPIENT CONSIDERS MATERIAL. THIS DOCUMENT IS TO BE READ
ALONG WITH ALL DISCLAIMERS FORMING PART OF THE ATTACHED DOCUMENT.
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1. What will be the nature of distributions by the Embassy REIT?
Distributions to the Unitholders of the Embassy REIT can be characterized as, (i) dividend, or (ii)
interest, or (iii) amortization of debt received from the Special Purpose Vehicles (‘SPVs’), or (iv) a
combination of the above. From a tax perspective the distribution to the Unitholder retains the
same character and proportion as the underlying income stream received by the Embassy REIT and
is taxable (as applicable) in the hands of the Unitholders basis their residential status.
2. There is a new beneficial tax regime in place where SPV’s have an option to opt for a reduced
tax rate [under section 115BAA of the Act]. Have the SPV’s opted for the lower tax regime
under the Income-tax Act, 1961 (‘the Act’)?
The SPV’s have not opted / will not opt for the lower tax regime under section 115BAA of the Act.
3. What are the tax implications of the distributions in the hands of a non-resident Unitholder?
i. Interest income - Taxable in the hands of the Unitholders at the applicable rates.
ii. Dividend income where the SPV has not opted for the lower tax regime [under section
115BAA of the Act] – Exempt in the hands of the Unitholders.
It will be relevant to note that all Embassy REIT SPV’s have not opted / will not opt for the
beneficial tax regime for the financial year 2022-23 and hence all dividends received by the
Unitholders from the Embassy REIT during this financial year will be exempt from tax in the
hands of the Unitholders.
iii. Dividend income where the SPV has opted for the lower tax regime [under section 115BAA
of the Act] - Taxable in the hands of the Unitholders at the applicable rates [not applicable
for the Embassy REIT Unitholders].
iv. Rental income – Taxable in the hands of the Unitholders at the applicable rates.
v. Balance distributions would be exempt from tax.
Further, a non-resident shall be entitled to claim benefits, if any, under the applicable Double Tax
Avoidance Agreement (‘DTAA’) that India may have entered into with its country of residence,
subject to fulfilment of necessary conditions as applicable.
4. What are the tax implications of the distributions in the hands of a resident Unitholder?
i. At tax rates applicable to the resident, to the extent that the distribution takes the character
of either interest or rental income.
ii. Dividend income where the SPV has not opted for the lower tax regime [under section
115BAA of the Act] – Exempt in the hands of the Unitholders.
It will be relevant to note that all Embassy REIT SPV’s have not opted / will not opt for the
beneficial tax regime for the financial year 2022-23 and hence all dividends received by the
Unitholders from the Embassy REIT during this financial year will be exempt from tax in the
hands of the Unitholders.
iii. Dividend income where the SPV has opted for the lower tax regime [under section 115BAA
of the Act] - Taxable in the hands of the Unitholders [not applicable for the Embassy REIT
Unitholders].
iv. Balance distributions would be exempt from tax.
5. What will be the taxes deductible for different categories of investors in case the distribution
is in the form of interest as envisaged under section 115UA of the Act?
Tax will be deducted under the provisions of section 194LBA of Indian income-tax law by the
Embassy REIT on distribution of interest income to its Unitholders. The category-wise applicable rate
of tax deduction is summarised in Annexure 1.
6. What will be the taxes deductible for different categories of investors in case the distribution
is in the form of dividend as envisaged under section 115UA of the Act?
No tax is deductible on dividends paid by the Embassy REIT to the Unitholders as per the provisions
of section 194LBA of the Act [given the fact that the SPV’s of the Embassy REIT have not opted /
will not opt for the beneficial tax regime for the financial year 2022-23].
7. What will be the taxes deductible for different categories of investors in case the distribution
is in the form of amortization of debt received by the Embassy REIT from the Special Purpose
Vehicles?
No tax is deductible on amortisation of debt paid by the Embassy REIT to the Unitholders.
8. What is amortization of debt received from the SPVs? In case the distribution is in the form of
amortization of debt received from SPVs by the Embassy REIT, whether such amount received
by the investor would need to be reduced from the cost of acquisition of the units in the hands
of the investor?
Proceeds from amortisation of debt received from SPV refers to repayment of loans by SPVs to
Embassy REIT.
Section 48 of the Act reads as follows:
“The income chargeable under the head "Capital gains" shall be computed, by deducting from the full
value of the consideration received or accruing as a result of the transfer of the capital asset the
following amounts, namely :—
(i) expenditure incurred wholly and exclusively in connection with such transfer;
(ii) the cost of acquisition of the asset and the cost of any improvement thereto:”
Section 48 of the Act does not for provide for any adjustment on account of amount received from the
business trust as amortization of loan from SPV. Therefore, no deduction from the cost of acquisition
of the units held by the investor is warranted.
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9. What is taxability on sale of units of the Embassy REIT?
The units of the Embassy REIT shall be regarded as long-term capital assets if the same are held for
a period of more than 3 years. If held for a period of less than 3 years, then such units will be regarded
as short-term capital assets.
In case the Embassy REIT units are held as a capital asset by the Unitholder, gains arising on sale
of the Embassy REIT units will be liable to tax as under:
i. Long-term capital gains exceeding INR 1 lakh on sale of units held for more than 36 months
– 10% (plus applicable surcharge and cess) as per section 112A of the Act; and
ii. Short-term capital gains on sale of units held for up to 36 months – 15% (plus
applicable surcharge and cess) as per section 111A of the Act.
The above rates of taxes are applicable on the basis that the transfer of Embassy REIT units have
been subjected to Securities Transaction Tax (‘STT’). Additionally, non-resident Unitholders may seek
to claim a lower rate of tax on the above income, under an applicable DTAA that India may have
entered in to with its country of residence subject to fulfilment of necessary conditions as applicable.
Where the Unitholder is a domestic company, the capital gains earned as above will be subject to
Minimum Alternate Tax (‘MAT’), under section 115JB of the Act (if applicable). However, MAT paid, if
any, by such companies should be available as credit which can be set-off against future income-
tax liability of such company for a period of up to 15 years as per section 115JAA of the Act.
In case the units are held as stock in trade by the investor, gains on sale of such units of the
Embassy REIT by the Unitholder would be taxable as business income. The implications under
MAT would be same as above.
10. When will TDS certificates be issued to the Unitholders?
The TDS certificates in Form 16A shall be issued to the Unitholders on quarterly basis in accordance
with the timelines prescribed under Indian income-tax law. The Embassy REIT will issue the TDS
certificates based on the following indicative timeline:
Quarter Actual payment of Timeline for issue of TDS
distribution certificates
April to June On or before August 31 On or before 15 November
July to September On or before November 30 On or before 15 February
October to December On or before February 28/ 29 On or before 15 June
(as applicable)
January to March On or before May 31 On or before 15 August
11. How can Unitholder claim the TDS certificate in case not received?
The TDS certificates are sent to the email id of the Unitholders registered with CDSL/ NSDL. In case
not received, email can be sent to the below e-mail address:
distribution.reit@embassyofficeparks.com
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12. By when should we furnish the income declaration form for the withholding of taxes?
If a non-resident Unitholder opts to submit an income declaration, the following aspects will need
to be kept in mind:
- Generally, only one income declaration needs to be filed for each financial year under
consideration. However, if there is any change in the income estimates of the non-resident
in the subsequent quarters, the non-resident may re-submit a revised income declaration
within the timelines prescribed below;
- In case a revised income declaration is given by a Unitholder, the revised income
declaration would replace the former declaration and taxes would be withheld accordingly;
- Any short deduction arising on account of change in income estimates (by virtue of the
revised declaration) would be made good in the subsequent quarter. However, any excess
deduction will not be refunded, and the Unitholder will have to file a return of income and
claim a refund for the same; and
- Any such declaration in respect of income and withholding implications arising therefrom
is at the sole responsibility and risk of the said Unitholder.
The income declaration can be furnished basis the following time-lines:
For distribution of quarter Timeline for submitting
income-declarations
January to March On or before 10 May
April to June On or before 31 July
July to September On or before 31 October
October to December On or before 31 January
The duly filled in income declaration form must be sent to the below e-mail address:
distribution.reit@embassyofficeparks.com
13. How does the Finance Act, 2022 impact the Unitholders?
Please note that the direct tax amendments announced in the Finance Act 2022 do not have
any impact on the tax implications of the distributions in the hands of the Unitholders as
discussed above.
Date of Publication: April 30, 2022
For Investor Relations: distribution.reit@embassyofficeparks.com
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Annexure 1
Tax withholding rates on distributions made by the Embassy REIT to various Unitholders
on income-streams characterized as interest income in terms of section 115UA of Indian
income-tax law.
The withholding tax provisions in case of income distributions by the Embassy REIT under
section 194LBA are summarised below. These rates will apply for
Financial Year 2022-23 relevant to Assessment Year 2023-24.
Reliance will be made on the BENPOS data with respect to details of the residential status of the
unitholder (i.e., resident or non-resident) and the status of the unitholder (i.e., individual, corporate,
Trust etc.).
Please note that non-resident investors may provide a declaration of income for a particular financial
year as per Annexure 2 attached herewith so that taxes may be withheld appropriately. As you will
note from the below table, the rate of surcharge varies depending upon the aggregate income of
a non-resident taxpayer. In case no declaration is made, taxes would be deducted at the
highest applicable rate.
Withholding tax
rates in case of
Category of Unitholder ‘Tax Resident’
for the period
April 1, 2022 to
March 31, 2023
Individuals 10%
Trust / Association of Persons / Body of individuals 10%
Hindu Undivided Family/ Firm / Limited liability partnership 10%
Alternate Investment Fund (‘AIF’) – Category I and II
Central Government vide CBDT notification No.51/2015 dated 25th June 0%
2015 has granted TDS exemption on all incomes other than business profits
received by Category I and II AIFs.
Alternate Investment Fund – Category III 10%
Mutual Fund
Under section 10(23D) of the Act, any income earned by a Mutual Fund
registered under the SEBI Act, 1992, or a Mutual Fund set up by a public
sector bank or a public financial institution, or a Mutual Fund authorized by
the Reserve Bank of India would be exempt from income-tax, subject to 0%
such conditions as the Central Government may by notification in the
Official Gazette specify in this behalf. Further, section 196 provides that tax
is not required to be deducted for any sum payable, being in the nature of
interest or dividend in respect of any securities owned by mutual funds
specified under section 10(23D) of the Act]
Company 10%
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Effective tax rate
(inclusive of
Category of Where the income or the aggregate of such
surcharge &
Unitholder (Non- incomes paid or likely to be paid and
education cess)
residents) subject to tax deduction
in case of ‘Non-
Residents’
- is below fifty lakh rupees 5.20%
- exceeds fifty lakh rupees does not exceed one
5.72%
crore rupees
Individuals, trusts,
body of individuals, - exceeds one crore rupees but does not exceed
association of 5.98%
two crore rupees
persons etc.
- exceeds two crore rupees but does not exceed
6.50%
five crore rupees
- exceeds five crore rupees 7.124%
- is below fifty lakh rupees 5.20%
Foreign - exceeds fifty lakh rupees does not exceed one
Portfolio 5.72%
crore rupees
Investor (‘FPI’)/
Foreign
- exceeds one crore rupees but does not exceed
Institutional 5.98%
two crore rupees
Investor (‘FII’)
set u p as a - exceeds two crore rupees but does not exceed
6.50%
Trust or an five crore rupees
Association of
Persons
- exceeds five crore rupees 7.124%
Foreign firm/ - is below one crore rupees 5.20%
Foreign limited
liability partnership - exceeds one crores rupees 5.824%
- is below one crore rupees 5.20%
Foreign - exceeds one crore rupees but does not exceed 5.304%
company 10 crores
- exceeds 10 crores 5.46%
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Annexure 2
Income declaration by non-residents for withholding of taxes
Sl. Particulars Comments
No
1. Name of the Assessee
2. Status (Corporate, Trust, individual etc.)
3. Permanent Account Number of the
Assessee, if available
Tax Identification Number issued by the
4.
country of tax residence
Financial Year (‘FY’) for which the
5. 2022-23
declaration is being made
Whether this is the first declaration being
6. made for the financial year in question
(please provide Yes/No answer only)
7. Residential Status for FY 2022-23
8. Country of residence for FY 2022-23
9. Copy of the Tax Residency
Certificate if available
Address in respect of country of
10. residence
11. E-Mail Address
12. Phone Number
13. Estimated total income for FY 2022-23 in
Indian Rupees
Signature of the Declarant
Designation (if applicable)
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Declaration/ Verification
I/We………………………………do hereby declare that to the best of my/our knowledge and belief
what is stated above is correct, complete and is truly stated.
I/ We authorize you to withhold taxes at the applicable rates based on the income declaration
provided.
I/ We acknowledge that in case taxes are short deduction on account of this declaration, I/ We would
need to pay differential taxes along with appropriate interest to the credit of the Central Government
and the Embassy REIT would not be responsible for any such additional tax, interest or
consequential penalties (as applicable).
I/ We acknowledge that in case any excess taxes are deducted based on this declaration, taxes
withheld and paid to the credit of the Central Government will not be refunded or adjusted by the
Embassy REIT.
I/ We acknowledge that any change to above declaration within a particular financial year shall be
intimated immediately to Embassy REIT.
Place: …………………………
Date: ………………………….
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Disclaimers
• This document has been prepared by Dhruva Advisors LLP (the ‘Firm’) in its capacity as the
tax advisors of the Embassy REIT for general information purposes only, without regard
to the specific objectives, financial situation or requirements of any particular person. These
FAQ’s may not be copied, published, distributed or transmitted, in whole or in part, for any
purpose, and should not be construed as legal, tax, investment or other advice.
• The information provided in the FAQ’s sets out the tax aspects for the Unitholders in a
summary manner only and is not a complete analysis or listing of all potential tax
consequences of the purchase, ownership and disposal of units under the Indian income-
tax law currently prevalent in India. It is not exhaustive or comprehensive and does not and
should not be deemed to constitute legal, financial or tax advice and we request investors
to consult their own legal, financial or tax advisors. For any further tax related questions, an
e-mail can be sent to the following e-mail address embassyreittax@dhruvaadvisors.com.
• In view of the individual nature of tax consequences each investor is advised to consult his/her
own tax advisor with respect to specific tax consequences. The above addresses aspects
only from an Indian income-tax law perspective and we have relied upon the provisions of
the Income-tax Act, 1961 and the Income tax Rules, 1962 and applicable notifications /
circulars and administrative interpretations thereof, which are subject to change or
modification by subsequent legislation or regulatory changes or administrative
pronouncements or judicial decisions. This document will not be updated for any changes in
tax law.
• The views mentioned above are not binding on any authority or Court, and hence, no
assurance is given that a position contrary to the opinions expressed herein, will not be asserted
by any authority, and / or sustained by an appellate authority or a Court of law.
• This document does not constitute a recommendation or solicitation or inducement to buy or
sell any securities including any securities of: (i) the Embassy REIT, its HoldCo, SPVs
and/or investment entities; or (ii) its Sponsors or any of the subsidiaries of the Sponsors, nor
shall part, or all, of these FAQ’s form the basis of, or be relied on, in connection with, any
contract or investment decision in relation to any securities.
• THESE FAQ’S DO NOT CONSTITUTE OR FORM ANY PART OF ANY OFFER, INVITATION
OR RECOMMENDATION TO PURCHASE OR SUBSCRIBE FOR ANY SECURITIES.
THESE FAQ’S SHOULD NOT FORM THE BASIS OF, OR BE RELIED UPON, IN
CONNECTION WITH, ANY CONTRACT OR INVESTMENT DECISION IN RELATION TO
ANY SECURITIES.
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