Section 223
Section 223: tax on income of unit holder and business trust
Section 223 deals with the taxation of a "business trust" (the Act's term covering structures such as REITs and InvITs) and the unit holders who invest in it - splitting income between what is taxed in the trust's own hands and what passes through, retaining its character, to unit holders.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
Income retains its character when distributed
Any income distributed by a business trust to its unit holders is deemed to be of the same nature and in the same proportion in the unit holder's hands as it was when received by, or accrued to, the business trust.
If, in a tax year, the distributed income (or part of it) received by a unit holder is of the nature referred to in Schedule V (Table: Sl. No. 3 or Sl. No. 4), that distributed income (or part) is deemed to be the unit holder's income and charged to tax as income of that tax year.
This pass-through characterisation does not apply to any sum referred to in Section 92(2)(k) received by a unit holder from a business trust.
Taxation of the business trust itself
Subject to Sections 196, 197 and 198, the total income of a business trust is charged to tax at the maximum marginal rate.
Reporting obligation
Any person responsible for making payment of income distributed on behalf of a business trust to a unit holder must furnish a statement to the unit holder and the prescribed authority, within the prescribed time, form and manner, giving details of the nature of the income paid during the tax year.
Frequently asked questions
Is a business trust the same as a REIT or InvIT?
Section 223 uses the Act's defined term "business trust" and covers such trusts and their unit holders; the section text itself does not use the terms REIT or InvIT.
At what rate is a business trust taxed on its own income?
Subject to Sections 196, 197 and 198, the total income of a business trust is charged to tax at the maximum marginal rate.
Does all distributed income pass through to unit holders unchanged?
Distributed income keeps the same nature and proportion in the unit holder's hands as it had in the trust's hands, except for a sum referred to in Section 92(2)(k), to which this pass-through rule does not apply.
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Talk to our tax team about business trust / REIT-InvIT incomeLast updated 9 September 2026