Taxation in case of sale of proprietary business

Hi..can anyboday suggest what can be the tax treatment if a sole proprietary business is sold for a lumpsum consideration to a partnership firm ? Proprietary business is in existance for more than 3 years.

Also if that potetial buyer (partnership firm) want to admit the proprietor into partnership as new partner, does it amount to conversion of proprietary into firm from the proprietor's point of view. How the lumpsum consideration be taxed in the hands of proprietor then? Buyer (firm) is not offering the consideration on the basis of financials of proprietor. 

Replies (3)

1. There will be LTCG in the hands of proprietor  2. The agreed price of transfer will be capital of tne newly inducted partner.

What if the consideration to be received in parts..? means suppose total agreed consideration is 50 lacs and 20 Lacs to be received as token and balance 30 to be received after 1 year..

 

In this case 50 lacs total liable to tax or 20 in this year and 30 in the next?

First year itself. Rest will be liability of the firm.

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