Stamp duty n capital gain

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sharad goyal (Querist)
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24 August 2014 I am promotor as well as director of the same pvt ltd co registered in mumbai. I have bought commercial office in mumbai though bank loan and my own fund. I wantto give that commerical property to co and I will take shares of my unlisted pvt ltdco. I want to co has to pay stamp duty to create its ownership or not as I am the promotor of the co. If yes how much %. Second any capital gain I have to pay. I m giving property at book value in same financial year. My consideration is shares of my own co not listed also. Awaiting your reply.
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sharad goyal

sharad goyal (Querist)
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Aashok Kumar Sharma online

Aashok Kumar Sharma online

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25 July 2025 You're essentially transferring a commercial property (held in your individual name) to a **Private Limited Company** (of which you're both promoter and director), **in exchange for shares**. This raises **two key issues**: **Stamp Duty** and **Capital Gains Tax**.

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## ✅ 1. **Stamp Duty in Maharashtra (Mumbai)**

Yes, **stamp duty is payable** on such a transfer — even if it's between you and your own company — because it involves a **transfer of immovable property** to a separate legal entity.

### 🔹 Applicable Rate in Mumbai:

* For **commercial property**: Stamp duty is **5%** (as of latest Maharashtra rates)
* Add **1% registration fee** (subject to a cap of ₹30,000)
* If within municipal limits, surcharge or metro cess may also apply (e.g., 1%)

👉 So, **effective duty may be around 6%** on the **market value or consideration amount**, whichever is **higher**.

📝 Even if you transfer at book value, the **Ready Reckoner value (Circle Rate)** will apply for stamp duty calculation.

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## ✅ 2. **Capital Gains Tax (Income Tax Act)**

### 💡 You're giving the property in exchange for shares — this is a **transfer** under **Section 2(47)** of the Income Tax Act.

However, the computation of **capital gain** depends on the fair market value of shares received and whether exemption applies.

### 🚫 No automatic exemption:

Since shares received are from a **private company**, **Section 47** does **not** exempt this transaction.

**Key Points**:

* **Consideration**: Fair market value (FMV) of shares received will be considered for capital gains calculation (not necessarily book value).
* **Capital Gain = FMV of shares received - Indexed cost of acquisition of property**
* If held for more than 24 months → Long-Term Capital Gain (LTCG), else Short-Term

### 🔸 Reporting:

This must be reported in your **Income Tax Return**, and capital gains tax (LTCG @ 20% with indexation, or STCG @ applicable slab) would apply.

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## ⚖️ Summary:

| Aspect | Details |
| --------------------- | ------------------------------------------------------------------------ |
| **Stamp Duty** | \~6% in Mumbai on property value or circle rate (whichever is higher) |
| **Who pays** | The company (as buyer) |
| **Capital Gains Tax** | Yes, applies on transfer to company; shares are treated as consideration |
| **Exemption** | Not available under Section 47 for transfer to own Pvt Ltd Co |
| **FMV of shares** | Must be considered while computing capital gain |

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## 🔍 Recommendation:

* Get a **valuation report** for fair market value of shares.
* Consider executing a **proper sale deed or transfer agreement** to avoid future litigation.
* Consult both a **chartered accountant** and a **stamp duty consultant** in Mumbai for accurate execution.

Would you like help with a sample calculation for capital gains or draft deed structure for this transfer?

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