Tax on Goodwill on LLP

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This discussion clarifies the tax treatment for receiving goodwill upon the sale of an LLP, particularly when the LLP originated from a private limited company with leased land and a building. The user is seeking information on the applicable tax rate for long-term capital gains (LTCG) on goodwill for the financial year 2025-26, inquiring if it will be 20% or the 12.5% plus surcharge and cess typically applied to LTCG. The consensus suggests the 12.5% rate plus applicable surcharges and cess will apply.

Bimal Shah

Bimal Shah (Querist)
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28 April 2025 Originally a private LTD company was formed in 1996, in which MIDC land was on 99 year lease was accuquired. Building was made in 1998. On 1-10-18 we converted this to LLP. For past 10 years we have rented out building to tenants on rent. There is no other business except rent, no stock/machinery etc.

There is no goodwill in company.

Someone wants to takeover company and want to pay me goodwill.

My question what is %age of tax I pay when I recieve goodwill in my personal account for FY25-26 (not FY24-25)

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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28 April 2025 Under Section 112, LTCG on the transfer of a capital asset is taxed at 12.50% (plus applicable surcharge and cess).

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Bimal Shah

Bimal Shah (Querist)
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29 April 2025 I will be selling in FY25-26. So will tax be 20% or 12.5%+surcharge and Cess?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 April 2025 For LTCG tax applicable is 12.5%

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Bimal Shah

Bimal Shah (Querist)
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29 April 2025 Thanks a lot for quick and precise reply

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 April 2025 You are welcome.

Bimal Shah

Bimal Shah (Querist)
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29 April 2025 Later I will need service of CA/Lawyer to vet MOU/admission cum retirement deeds etc. Incase if you can handled such matters in past, please send me your business card on bimalshah1967@gmail.com or 9821329214

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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28 September 2025 Good luck.....

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