Return of Authorized Capital

Ernest (DEO) (115 Points)

23 September 2009  

Our private ltd company raised additional capital from existing directors and shareholders for an expansion plan.  The expansion plan has been cancelled.

1. What are our options for return of the additional capital without making it taxable income in the hand of the shareholders.

In other words, is there a tax-neutral way to return/reduce authorized capital of a company ?  Is this a cumbersome process leading to increased scrutiny ?

2. Although we do not wish to shut down the company, if we go down that path is there a way to return the capital at that point without incurring taxes ? I assume it is not an easy task to shutdown a pvt. ltd. company in India ?

 

Thank you for any guidance.