22 January 2019
There are 3 directors in a private limited company. 2 directors have decided to come out of the company. The company is carrying out business in its own premises. Valuation of Land & Building, Plant & Machinery, Furniture & Fittings is done by an approved valuer. One of the director is settling the other two directors by giving their share as per valuation done. What is the tax consequence on the part of two directors who receive their share and come out of business. (Share includes Capital balance,Goodwill and Share from Land & Building, Plant & Machinery, Furniture & Fittings etc.)
23 January 2019
If shares are held for more than 24 months then it shall be considered as long term capital gain in the hands of directors else short term capital gain. Short term capital gain charged at 15% and long term capital gain is charged at 20% after considering cost of acquisition and improvements. Transfer of long term capital assets shall have benefit of cost of indexation. Full value of consideration in your case shall be a market value as determined by the valuer.
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