I incorporated a private limited company in 2009 with Rs one lakh paid up capital and there are just two shareholders me and my son The company at present has reserves of Rs one crore which are invested in mutual funds We now wish to voluntarily wind up this company as I am getting old and wish to retire and my son is not interested in running the company. There are no other assets except mutual fund holdings as above and no creditors or liabilities and all IT and Roc filings are up to date Now if this company is wound up and I get my share of value of reserves... Will that be treated as long term capital gain or will get added to my income of current year Please clarify on above. I would be really grateful to you
Sir
distribution of reserve to shareholders are treated as dividend thus DDT(CDT) Dividend distribution tax is applicable on the same and above a certain limit dividend is also taxable in the hands of receiver, thus no capital gain tax on this transactions
Hi,
Distribution of assets by the company but on liquidation is not liable to capital gain for the company.
However, shareholder will be liable to pay capital gain tax on the same.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Hi,
There will be no capital gains for the company. However you will need to pay capital gains tax on the amounts received in the individual capacity.
Regards,
Nikhil.
Forgot to mention a related point that distribution of assets on liquidation by a company will be deemed to be dividend to the extent it balance of accumulated free reserves and the company will have to pay dividend distribution tax (DDT) on the same.
The amount on which DDT has been paid will be reduced from sale consideration in the hand of shareholders and will reduce capital gain tax.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Dear Sir,
In respect to the Company
1) Any distribution of assets whether in cash or in kind made by the company on liquidation is deemed as dividend and company needs to pay dividend distribution tax @ 17.304% which should be paid within 14 days of the distribution of assets.
2) Company not liable for capital gain tax as exempted u/s 46.
In respect to the Shareholder
1) Shareholder needs to pay LTCG. Assets received will be deemed as full value of consideration and you can claim deduction of deemed dividend from the full value of consideration.
Thanks
.
The proceeds received in the event of winding up of the company are chargeable under the head "Capital Gains". They will be charged as Long Term/ Short Term based on the date of investment in such shares.
If the amount received is Bank Balance, it will be taxed as reduced by Cost of Acquisition of shares. In case the proceeds are received in the form of Assets, the same shall be taxed as per the fair market value of assets so transferred as on date of such transfer as reduced by Cost of Acquisition of shares.
Regards,
Hi
The company would not be liable to any capital gain taxes. However, DDT shall apply to the extent of accumulated profits.
The shareholders shall be liable to pay capital gain taxes for the amounts distributed in excess of amounts on which DDT has been paid by the company.
Hi,
At the time of winding up of the company, the mutual fund holdings will be realised or transferred to the shareholders. However, in both the cases income from such sale/ transfer shall be taxable under the head long term capital gains in the income tax computation of the company.
Therefore, this will not be taxable in your income tax return or your son's tax return for your respective shares of Assets or mutual funds ,received from the company.
Thanks'
Damini
