Pvt ltd company sale ltcg.

Tax queries 165 views 2 replies
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Engineer
3 Points Joined November 2021

We sold our 30 year old pvt ltd company on10.7.24.with Land, building and machenery.

Will it be cosidered as share sale or asset sale for long term capital gain tax?

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On 12 January 2025 at 14:54 Report
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Master in Accounts & high court Advocate
9447 Points Joined December 2011

The sale of your 30-year-old private limited company is a significant transaction.

Share Sale vs. Asset Sale The tax implications depend on whether the sale is considered a share sale or an asset sale.

 Share Sale If the sale is considered a share sale:

 1. _Long-term capital gain (LTCG) tax_: As the company is over 30 years old, the gain will be considered LTCG.

 2. _Tax rate_: LTCG tax rate is 20% with indexation benefit (or 10% without indexation, if the gain is up to ₹1 crore).

3e3. _Exemptions_: You may be eligible for exemptions under Section 54B (reinvestment in new asset) or Section 54EC (reinvestment in specified bonds).

Asset Sale If the sale is considered an asset sale: 1. _Capital gain tax_: The gain will be taxed as capital gain, but the tax rate and exemptions may differ from share sale.

 2. _Asset-wise tax treatment_: Each asset (land, building, machinery) will be taxed separately, considering its individual cost, indexation, and sale value. Determining Share Sale or

Asset Sale To determine whether the sale is a share sale or an asset sale: 1. _Check the sale agreement_: Review the sale agreement to see if it specifies the sale of shares or individual assets.

2. _Consider the assets transferred_: If the sale includes the transfer of specific assets (like land, building, machinery), it may be considered an asset sale.

3. _Tax authority's discretion_: Ultimately, the tax authority may decide whether the sale is a share sale or an asset sale, based on the facts and circumstances of the case.

Recommendations To ensure accurate tax compliance: 1. _Consult a tax professional_: Seek guidance from a qualified tax professional or chartered accountant.

2. _Review the sale agreement_: Carefully examine the sale agreement to understand the terms and conditions.

3. _Maintain documentation_: Keep detailed records of the sale, including asset values, sale proceeds, and tax-related documents. Please consult a tax professional to determine the specific tax implications for your situation.

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On 13 January 2025 at 15:49
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Engineer
3 Points Joined November 2021

Thanks for your clear valuable response Mr. Ramachary.🙏🏻

A. K. Bhat.

 

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On 14 January 2025 at 20:06


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