LIVE GST Certification Course by CA Arun Chhajer. Register Now!!

Changing Company Constitution

kings22 (Shareholder) (160 Points)

08 April 2024

Private Limited company sells a land how is Long Term Capital Gain tax be applied?

1 - Does the Private Limited Company pay tax on Long Term Capital Gain?

2- After the sale of land when the private company distributes the remaining to shareholders , are they taxed again for the Capital Gain in Share Price?

Please advise on best way to minimize tax liability.

Thank you!

Reply
Follow
Share

4 Replies

Lekshmi (Chartered Accountant) (1285 Points)
Replied 08 April 2024

1. Yes

2. Dividend distributed to shareholders is taxable.

Advise depends on many factors like is it still running business etc.

1 Like

kings22 (Shareholder) (160 Points)
Replied 09 April 2024

Thank you Lekshmi. To understand this better - are we saying the shareholders will be subject to double taxation?

As an example if lets say the LTCG for sale of property is 1 crore, The Private Limited pays lets say 20 Lacs tax on this and decides to distribute the remaining 80 Lacs to shareholders (let us assume single shareholder with 100% shares). The cost of shares to the shareholder was at Rs 10 face value. Does it mean that the shareholders will end up paying now additional capital gain tax on the 80 lacs? Please advise.

Amit Kumar Sahoo (4 Points)
Replied 09 April 2024

No capital gain will be chargeable to them, as the company will share the profit to their shareholder, the income they gain on that basis they will have to pay tax.

kings22 (Shareholder) (160 Points)
Replied 10 April 2024

So in above example I provided are you saying that the Company will pay 20 Lacs tax and shareholder will pay tax on remaining 80 Lacs distributed as dividend as per the Income Tax slabs? Won't will be huge taxation on both sides?