Transfer of property to director
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
23 June 2015
Dear Sir,
I want to know can we transfer the property of Company to Director of the company?
If yes tell me the procedure and Tax Effect of the same ?
I want to know can we transfer the property of Company to Director of the company?
If yes tell me the procedure and Tax Effect of the same ?
23 June 2015
you can tfr the property at market price and make calculation of tax as per assets.
23 June 2015
you can tfr the property at market price and make calculation of tax as per assets.
Querist : Anonymous
Querist :
Anonymous
(Querist)
23 June 2015
Dear Sir
Can i transfer the said property as a gift to Director ? if yes , Then what will be Tax effect?
Can i transfer the said property as a gift to Director ? if yes , Then what will be Tax effect?
Querist : Anonymous
Querist :
Anonymous
(Querist)
23 June 2015
Dear Sir
Can i transfer the said property as a gift to Director ? if yes , Then what will be Tax effect?
Can i transfer the said property as a gift to Director ? if yes , Then what will be Tax effect?
02 August 2025
Good question! Here’s a detailed answer about **transfer of company property to a director** and tax implications, including gift transfer:
---
### 1. **Can a company transfer property to its director?**
* Yes, a company can transfer property to its director, but it must be done at **fair market value** (FMV) to avoid tax complications.
* The transaction should be properly **approved by the Board of Directors** and comply with company law and accounting standards.
* The sale should be at **arm’s length** to prevent tax scrutiny.
---
### 2. **Procedure for transfer of property from company to director:**
* **Board Resolution:** Approve transfer, specify consideration (FMV).
* **Valuation Report:** Obtain a professional valuation to fix FMV.
* **Agreement for Sale:** Draft and execute.
* **Payment:** Director to pay agreed consideration.
* **Register the sale deed** with relevant authority.
* **Accounting entries:** Remove asset from company books; record sale proceeds.
* **Tax filings:** Reflect the transaction in Income Tax and GST returns, if applicable.
---
### 3. **Tax implications if transferred at market price:**
* **In the hands of company:**
* Transfer of a capital asset results in **Capital Gains Tax**.
* Since it’s sale at FMV, the difference between sale price and cost of acquisition is chargeable as capital gain.
* For depreciable assets, **Section 50** applies (capital gains computed on written down value).
* Company must pay **corporate tax** on capital gains.
* **GST may apply** on transfer of immovable property as per current laws.
* **In the hands of director:**
* Director acquires property at FMV; no immediate tax on acquisition.
* Future capital gains on sale by director will be based on FMV as cost.
---
### 4. **What if the property is transferred as a *gift* to director?**
* The company can gift the property, but this has important tax consequences.
* **In the hands of the company:**
* Transfer without consideration is treated as **deemed sale** at FMV.
* Company must pay **capital gains tax** on FMV minus cost of acquisition.
* **In the hands of director:**
* As per **Section 56(2)(x)**, property received without consideration from a company (which is a non-relative) is taxable as income from other sources.
* Director will have to pay tax on FMV of property received as gift (except in cases where shares are transferred under certain conditions, not applicable here).
---
### 5. **Summary Table:**
| Transfer Type | Tax in Company’s Hands | Tax in Director’s Hands |
| ----------------------- | ------------------------------- | ------------------------------------------- |
| Sale at FMV | Capital Gains Tax on difference | No immediate tax |
| Gift (No consideration) | Capital Gains Tax on FMV | Taxable as Income from Other Sources on FMV |
---
### 6. **Other legal considerations:**
* Board approval and possibly shareholders' approval (depending on company law and value of asset).
* Compliance with Companies Act provisions regarding related party transactions (Section 188).
* Stamp duty on transfer and registration charges.
---
### **Conclusion:**
* Best practice is to transfer at FMV with proper approvals and documentation.
* Gift transfer is generally **not tax-efficient** due to tax liability in hands of director.
* Consult tax and legal experts before proceeding.
---
Would you like me to help draft the board resolution or sale agreement format for this transfer?
---
### 1. **Can a company transfer property to its director?**
* Yes, a company can transfer property to its director, but it must be done at **fair market value** (FMV) to avoid tax complications.
* The transaction should be properly **approved by the Board of Directors** and comply with company law and accounting standards.
* The sale should be at **arm’s length** to prevent tax scrutiny.
---
### 2. **Procedure for transfer of property from company to director:**
* **Board Resolution:** Approve transfer, specify consideration (FMV).
* **Valuation Report:** Obtain a professional valuation to fix FMV.
* **Agreement for Sale:** Draft and execute.
* **Payment:** Director to pay agreed consideration.
* **Register the sale deed** with relevant authority.
* **Accounting entries:** Remove asset from company books; record sale proceeds.
* **Tax filings:** Reflect the transaction in Income Tax and GST returns, if applicable.
---
### 3. **Tax implications if transferred at market price:**
* **In the hands of company:**
* Transfer of a capital asset results in **Capital Gains Tax**.
* Since it’s sale at FMV, the difference between sale price and cost of acquisition is chargeable as capital gain.
* For depreciable assets, **Section 50** applies (capital gains computed on written down value).
* Company must pay **corporate tax** on capital gains.
* **GST may apply** on transfer of immovable property as per current laws.
* **In the hands of director:**
* Director acquires property at FMV; no immediate tax on acquisition.
* Future capital gains on sale by director will be based on FMV as cost.
---
### 4. **What if the property is transferred as a *gift* to director?**
* The company can gift the property, but this has important tax consequences.
* **In the hands of the company:**
* Transfer without consideration is treated as **deemed sale** at FMV.
* Company must pay **capital gains tax** on FMV minus cost of acquisition.
* **In the hands of director:**
* As per **Section 56(2)(x)**, property received without consideration from a company (which is a non-relative) is taxable as income from other sources.
* Director will have to pay tax on FMV of property received as gift (except in cases where shares are transferred under certain conditions, not applicable here).
---
### 5. **Summary Table:**
| Transfer Type | Tax in Company’s Hands | Tax in Director’s Hands |
| ----------------------- | ------------------------------- | ------------------------------------------- |
| Sale at FMV | Capital Gains Tax on difference | No immediate tax |
| Gift (No consideration) | Capital Gains Tax on FMV | Taxable as Income from Other Sources on FMV |
---
### 6. **Other legal considerations:**
* Board approval and possibly shareholders' approval (depending on company law and value of asset).
* Compliance with Companies Act provisions regarding related party transactions (Section 188).
* Stamp duty on transfer and registration charges.
---
### **Conclusion:**
* Best practice is to transfer at FMV with proper approvals and documentation.
* Gift transfer is generally **not tax-efficient** due to tax liability in hands of director.
* Consult tax and legal experts before proceeding.
---
Would you like me to help draft the board resolution or sale agreement format for this transfer?
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