Capital gain taxation for llp

Hi,

Business income of LLP is taxable @ 30%.

If it is the primary business of LLP to invest in MF or equity and earn interest or divdend on it, in that case it will be taxable @ 30% subject to exemption available for dividend received.

If it is not a business for LLP, in that case it will be treated as investment and hence, capital asset. Sale of such capital asset results in capital gain. Rate of tax or exemption from such capital gain depends on the nature of capital asset i.e short term or long term and whether STT is paid while selling or not.

Regards

CA Shivani Mittal

Thanks Shivaniji for detailed reply. I have few more queries based on your reply. 
1. On basis of which criteria "primary business" of LLP is decided?
2. Suppose we invest 100 % amount in MF & equity and sell it after 1 year or later.
Now we have 2 scenario:-
a)Capital gain of that transection is distributed amoung the partners as dividend, how taxation is applied here?
b) capital gain is reinvested in MF & equity. What will be taxation in this case?

Originally posted by : Karthik.V.Kulkarni
	There is no specific exemption for llp. Capital gain is taxed on sale of capital asset. Kindly provide more info on this issue as to which capitalasset has been sold and date of purchase of the sold capital asset.

Hi, We have not created the LLP yet, I am just collecting required information. Our aim is to invest in equity & MF only and we are not planning to do any other business.

Primary business of LLP is defined by the incorporaion document/the LLP agreement which states the nature of business.

Secondly LLP is as good as a partnership firm as per Income Tax Act. Hence, dividend cannot be distributed. It will be the same as profit sharing as done in a normal partnership firm. Accordingly, share of profits from partnership is exempt in the hands of partner u/s 10(2A).

Business income of LLP is taxable @ 30% + EC & SHEC.

Regards

CA Shivani Mittal

Hi,

If you are doing business of equity and MF then the tax applicable will not be capital gains rather it will be normal business income , the tax shall be at the rate of 30% as applicable to all the business income . Any Income which is left after tax shall be shared between partners and the same shall be tax free in the hands of the partners . 

Regards

Karthik V Kulkarni