Capital gains tax on shares transferred to llp/trust

Hello,

I am planning to form a new LLP or Private Trust and transfer my stakes in a few private and public companies into the LLP/Trust. 

I have already held these shares for more than 365 days, hence if I sell them today, I would attract no capital gains tax. My question is, if I transfer these to an LLP/Trust as my contribution, would the tax department view a future sale of these shares as short term capital gain (if it occurs less than 365 days from the date of transferring) or will it still be viewed as long term capital gain?

Please specify the treatment in both cases, a trust and an LLP.

Thank you for your time and assistance.

 

 

Replies (1)

At the time of transfer of your scrips to partnership firm as Capital Contribution is transfer as per sec.2(47) and it will attract CAPITAL GAIN TAX. Tax will be payable on (Amount recorded in firm as capital on account of this asset - Cost / Indexed cost of acquisition as the case may be) multiplied by respecitve tax rates. As you said you hold shraes in both private limited and Public limited company,I bring you notice that Definition of Short term capital asset in respect of scrips has changed. For listed, if you hold more than 365 days it is Long term capital gain and if unlisted you should hold more than 3 years to treat it as Long term capital gain. To the extent of listed shares, at the time of contribution by you exempt u/s.111A and to the extent of LTCG, you are liable to pay Capital gain. since it attract capital gain at time of your contribution to firm as a capital whether exempted or not, when a subsequen transfer is made by firm, then time limit to decide whether STCG or LTCG should be computed from the date where firm recorded asset in books as your capital to the date of transfer.

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