Article on LLP and Income Tax Benefits of making LLP Surcharge is not applicable to LLP. DDT will not be payable. Section 40b can be utilized properly. Concept of deemed dividend will not come into picture. Same deductions will be enjoyed by LLP .i.e of s30-38. Liability will be limited. Free from some other legal bars Conversion of partnership firm into LLP Memorandum explaining the provisions of the Finance (No. 2) Bill 2009 provides that General Partnership and LLP is treated as equivalent. (except for recovery purpose) for income tax purpose LLP will not have any tax implications if following two conditions are satisfied The rights and obligations of partners must remain same after conversion and there is no transfer of any asset or liability after conversion. If any of the above condition is violated, the capital gain specified u/s 45 will arise. However above clarification is ambiguous and may create several issues Conversion of company into LLP If Private company and Unlisted public company fulfills the conditions of s47(xiiia) than capital gains tax on transfer of capital assets and intangible assets will not arise. conditions of s47(xiiia) required to be fulfilled Conversion must be accordance to s56/57 of LLP act 2008. Gross turnover should not be more than 60lakhs in any of the three preceding years, All assets and liabilities to be transferred to LLP, All shareholders of compant become partner in llp in same proportion of their shareholding in company. No consideration other than share in profit and capital contribution in LLP arises to partners, Shareholders of company would be entitled to receive atleast 50% of profit of LLP for 5 years from the date of conversion. No amount is paid, either directly or indirectly to any partner out of accumulated profits. Setoff and carry forward of losses will be allowed,if the conditions are violated than benefit availed by company shall be deemed to be profit and gains of the successor LLP chargeable to tax during the year in which conditions are violated. Important point to be noted -> *MAT credit will not be allowed in the hands of LLP , it means it cannot be carry forwarded by the company if it converts into LLP. Plus provisions of AMT will be applicable to LLP. Hope you enjoyed this article,
Posted on: Mon, 04 Aug 2014 02:28:56 +0000
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