22 July 2025
For a limited company selling a building, here are key points and ways to plan tax efficiently:
Taxation on Sale of Property by a Limited Company Nature of Income:
Income from sale of building by a company is usually business income, unless the property is a long-term capital asset held for more than 36 months, in which case capital gains tax applies.
For immovable property held over 36 months, it is considered a long-term capital asset and taxed under Capital Gains.
Tax Rate:
Capital Gains Tax:
Long-term capital gains (LTCG) on immovable property: Taxed at 20% with indexation (plus applicable surcharge and cess).
Business Income:
Taxed at the applicable corporate tax rates (plus surcharge and cess).
If it is short-term capital gain (held less than 36 months), it is taxed at normal corporate rates.
Deductions:
Cost of acquisition and improvement (indexed, if LTCG).
Expenses related to transfer (brokerage, legal fees).
Depreciation claimed on the building needs to be adjusted (since depreciation reduces cost in case of capital gains).
Tax Saving/Planning Options Invest in Capital Gains Bonds (Section 54EC)
If LTCG arises, invest in specified bonds (NHAI, REC) within 6 months.
Max limit Rs. 50 lakhs.
Exemption available on invested amount.
Set Off Losses
Set off any business losses or capital losses (short term/long term) to reduce overall tax.
Claim Depreciation Properly
Ensure depreciation on building is claimed correctly as it reduces taxable business income.
Reinvest in Another Property
Under Section 54F (if applicable), for individuals; not for companies.
For companies, reinvestment in business assets can reduce tax liability as part of business expenses.
Timing of Sale
Holding property for more than 36 months to get LTCG tax benefits.
Plan sale date accordingly.
Use Book Profit Exemptions
If under specific schemes like SEZ or under special tax regimes, exemptions might be available.
Professional Tax Planning
Consult CA for company-specific planning based on your company’s overall tax position.
Summary Aspect Details Tax on Sale LTCG @ 20% with indexation (if >36 months) or normal corporate tax Exemption Invest in 54EC bonds to save LTCG tax Depreciation Adjust depreciation claimed Holding Period >36 months for LTCG benefit Return Filing Company to file ITR and pay advance tax accordingly
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