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Conversion of private limited as the only income is rental

DShah (Analyst) (27 Points)

07 September 2012

hi,

A private limited company into manufacturing has stopped manufacturing and has given the unit on rent. now the only income is rent income. which is attracting income tax and service tax. is there any way that this can be minimised?. as the compnay does not have any business related activities, no expenses can be shown.

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CS Samiksha (Company Secretary) (85 Points)
Replied 07 September 2012

Dear Mr. Shah,

Kindly make application for striking off name of Company from ROC records under section 560 of Companies Act; 1956.

Sec. 560 grants power to ROC to srike the defunct company off the register where the Registrar has reasonable cause to believe that a company is not carrying on business or in operation on its own and on the application by the company.

Therefore your rental income will be chargeble to income tax under the head "income from House Property" at the lower tax rate depending on tax slab to which the assessee (i.e. individual who is owner of the property) as compared to high tax @ 30%.

Further Chapter 92 of Finance Act, 2007 levy Service tax on renting of immovable properties for commercial use. So if your unit is rented for Commercial use then only Service tax will be payable and this service tax your can charge back from your tenant. So there will not be payment of Service tax out of your pocket as you will recover it from your tenant.

Regards,

CS Samiksha Kansara

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DShah (Analyst) (27 Points)
Replied 15 September 2012

Originally posted by : CS Samiksha
	Dear Mr. Shah, Kindly make application for striking off name of Company from ROC records under section 560 of Companies Act; 1956. Sec. 560 grants power to ROC to srike the defunct company off the register where the Registrar has reasonable cause to believe that a company is not carrying on business or in operation on its own and on the application by the company. Therefore your rental income will be chargeble to income tax under the head "income from House Property" at the lower tax rate depending on tax slab to which the assessee (i.e. individual who is owner of the property) as compared to high tax @ 30%. Further Chapter 92 of Finance Act, 2007 levy Service tax on renting of immovable properties for commercial use. So if your unit is rented for Commercial use then only Service tax will be payable and this service tax your can charge back from your tenant. So there will not be payment of Service tax out of your pocket as you will recover it from your tenant. Regards, CS Samiksha Kansara

thank you for that...but the property is in the name of the company...the company receives the rent....and as per the best of my knowledge, in order for it to be a defunct company i will have to dispose of my asset and clear teh liabilities....in this case disposing the asset means disposing the asset which is generating rent...will converting into LLP help to reduce the tax?