Buying School and Renting it to the same management?
05 July 2020
I am planning to buy a school (Land + Building) which is currently registered as a Society under Andhra Pradesh Societies Act and rent it out to the same management. Please note that, I am not planning to run the school at least for next few years, due to different obligations, so I am planning to rent it out to the current management as they are interested in running the school for next few years.
As the School is currently registered under Society, I am not sure what is the best way to buy and rent this school. Could any experts in this forum please answer below questions. Greatly appreciate your help on this.
1. Is it a good idea to create new trust with my family members as members and purchase the School (land/building) in the name of trust and rent the school to the existing educational society which currently owns the school? OR Is it better to buy this property as an individual (on my name) and create rental agreement?
2. Which is better between registering property under my name vs newly created trust name from cost/taxes perspective? In case of trust name, Do I need to pay Property registration charges of 7.5% ? For example, in Andhra Pradesh, the base Andhra Pradesh Stamp Duty rate of apartment/ flat is 5%, transfer duty is 1.5%, and the registration fee is 0.5 %
3. In future, If I want to run the school then what is better option Purchasing the school on my name VS purchasing the school on trust name?
06 July 2020
1 and 2 It's a good idea to create new trust with your family members as members and purchase the School (land/building) in the name of trust.
3 If you run the school in the name of the trust in future you can avail tax exemption on running educational institutions.
08 July 2020
Thank you very much Sir for your reply. One last question...Can I rent the property to the school after purchasing it in the name of trust?
08 July 2020
Yes it can be rented out but income is taxable.