08 May 2012
Hello There Currently we are running Proprietory concern where my father is a sole proprietor. Now we decided to convert this proprietory firm in to a partnership firm where My father, me and my younger brother is a going to be a partners. Now my question is, Does assets in the proprietory firm will attract any stamp duty or taxation while transferring that assets to partnership firm?
08 May 2012
In case of Capital Assets, the amount credited in the firm's books will be treated as sales consideration for the purpose of computation of capital gains. . Any profit arising out of transfer of Current assets at price other than recorded in the books of the proprietor will result into business profit/loss. . Stamp Duty in case of property is not required to be paid in case partners have a mutual understanding. .
09 May 2012
Transfer of Capital Assets from Properietory concern to Partnership will attract Income Tax in the form of Capital Gains.
But if Company is created instead of Partnership Firm, then there will be no Capital Gain Tax (subject to some provisions)
Further, No Stamp Duty is required for sole properietor
However you have to execute Partnership Deed on the appropriate value of Stamp Paper (which is different in every state)
In case you create company, then there is also required to pay Stamp Duty during Incorporation of Company (which is again different from state to state)
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