Double taxation issue for a long term project

CA Pranjal Dhariwal (Business) (248 Points)

23 February 2023  

Hi All, Have a question related to long term project in solar power.

So we have a contract to sell power at fixed rate for 25 years to some PSU's. The project has expected Project IRR of around 14% and Equity IRR of around 18% consider 70% debt @ 10%.All this will be done in a private limited company as banks can fund only pvt ltd companies and not LLP's as of now.

There are equity Investors who are interest who want to be part of the project, however issue is, how do we give returns to them.

After earning 100 Rs. we pay 25 rs as income tax and balance left 75 Rs. if distributed as dividend, will again be subjected to 30% tax in the hands of investors, effectively leaving 52.5 as money in hand.

question 2: Also with multiple investors, we would prefer to have them all come in an LLP or another Pvt Ltd as a single entity otherwise the project company shall have to deal with multiple share holders. What can be suggested for this?

 

A big thanks in advance to anyone who reads this and spends their time for us.