Sale of liquor license

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 March 2014 Customer have a liquor license & now he want to sale the license to other pls confirm what is the tax treatment on sale of liquor license

CA Surendra Bhatt (ACA,DISA)

CA Surendra Bhatt (ACA,DISA) (Expert)
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09 March 2014 Provisions of Capital Gain shall apply to your case.

Querist : Anonymous

Querist : Anonymous (Querist)

12 March 2014 Suppose Customer have received the license from Govt in 1960 & now he want to sale @ Rs. 2 lacs in that case what is the tax liability & is there any way to save tax by investing the same.

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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22 July 2025 Here’s the detailed tax treatment and options regarding the **sale of a liquor license**:

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### 1. **Tax Treatment on Sale of Liquor License**

* A **liquor license is considered an intangible asset**.
* On sale, the **capital gains provisions apply**.
* Since the license was acquired in 1960 (more than 3 years ago), the gain is treated as a **Long Term Capital Gain (LTCG)**.

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### 2. **How to Calculate Capital Gains?**

* **Capital Gain = Sale Price – Indexed Cost of Acquisition**
* Since the license was acquired long back, you can apply **Cost Inflation Index (CII)** to adjust the purchase cost for inflation.
* However, if original purchase cost is not known or very old, the cost may be taken as **Fair Market Value (FMV) as on 1 April 2001** (the base year for indexation).

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### 3. **Tax Liability**

* LTCG from sale of license will be taxed at **20% (with indexation benefits)**.
* The gain must be reported in income tax return under capital gains head.

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### 4. **Ways to Save Tax**

* Under **Section 54EC**, you can **invest capital gains up to Rs. 50 lakhs in specified bonds** (e.g., NHAI or REC bonds) within 6 months of sale to claim exemption.
* Also, under **Section 54F**, if you invest the entire sale proceeds in a **residential property** (other than a house used for business), you may get exemption.
* Other capital gains exemption provisions may be explored based on your circumstances.

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### Summary:

| Aspect | Details |
| ----------------- | ---------------------------------------------------------- |
| Asset Type | Intangible asset (liquor license) |
| Holding Period | >3 years → LTCG |
| Tax Rate | 20% with indexation |
| Cost Basis | Indexed cost or FMV as of 01/04/2001 |
| Exemption Options | Investment in 54EC bonds or residential property under 54F |

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If you want, I can help prepare a **calculation example** or guide on **how to file capital gains return for this sale**. Would you like that?

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