Exemption to facilitate the Conversion Of Partnership Firm into a Company in case of NRI

[Capital Gain of an NRI could be Completely Exempt from Income Tax]

Full exemption is allowed in respect of capital gains on the conversion of a partnership firm into a company, under Section 47(xiii). Thus, it is provided that where a firm is succeeded by a company in the business carried on by it as a result of which the firm sells or otherwise transfers any capital asset, or intangible assets to the company, the entire capital gains would be exempt from tax provided the following conditions are full field:

  1. All the assets and liabilities of the firm relating to business immediately before the succession become the assets and liabilities of the company;

  2. All the partners of the firm immediately before the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of succession;

  3. The partners of the firm do not receive any consideration or benefit directly or indirectly in any form or manner other than by way of allotment of shares in the company: and

The aggregate of the shareholding in the company of partners of the firm is not less than 50% of the total  voting power in the company and their shareholding continues to be as such for a period of five years from the date of succession. This has been extended to a stock exchange converted into a company, as per SEBI approval for de mutualisation or corporatization where the transaction would not be treated as “transfer” under Section 47(xiiia) from the A.Y. 2004- 2005.
 
Capital Gain of an NRI could be Completely Exempt from Income Tax
1. Exemption of Long-Term Capital Gains regarding Residential House Property (Section 54)
2. Exemption of Long-Term Capital Gains from any Capital Asset On Investment In House Property (Section 54F)
3. Exemption of Long-Term Capital Gains On Investment In Bonds of NHAI & REC
4. Exemption to facilitate the Conversion Of Partnership Firm into a Company
5. Exemption from the Levy Of Capital Gains Tax to facilitate Conversion Of Sole Proprietary Concern Into A Company
6. Computation of Capital Gains In Real Estate Transactions
7. Other Important Exemptions Regarding Capital Gains Available to NRI
8. Cost Inflation Index And Computation Of Capital Gains in case of NRI
9. Reduction Of Tax Rate On Long-Term Capital Gains In Regard To Shares And Securities
10. Concessional Rate Of Tax On Income From Certain Global Depository Receipts
11.Tax Treatment Of Capital Gain On Sale Of Shares, Debentures, Etc. Received Under ESOP
12.Provisions Relating To Set-Off Of Long-Term Capital Loss And Carry Forward Thereof ModifiedSections 70 and 74
13. Exemption Of Long-Term Capital Gains On Securities And Lower Tax On Short-Term Capital Gains
14. Issue of Foreign Currency Exchangeable Bonds Scheme, 2008
15. Miscellaneous provisions’ regarding Capital Gains in case of NRI
 
 
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