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Private limited company buys a residential property

17 June 2021

A private limited company buys a residential property in its name ?and can a director resides in ? it Can the company claim depreciation?and other borrowing costs ?

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4 Replies

CA. Sourav Sarkar (Chartered Accountant ) (24583 Points)
Replied 17 June 2021

Yes I think depreciation can be claimed

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abhishek jain (3 Points)
Replied 17 June 2021

Can a director reside in that property??

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 18 June 2021

It can be treated like a owner occupied property and depreciated. No HRA allowance for the director though.

Mehak Sharma (Content writer) (32 Points)
Replied 11 February 2025

When a private limited company buys a residential property, several key points should be considered. Those points are as follows:

Legal Ownership: The property will be owned by the company, not the individual shareholders or directors. The company itself will be listed as the legal owner of the residential property.

Company's Purpose: The property must be purchased for a legitimate business purpose. For example, if the company is in the real estate business, the purchase could be part of its trading activities. If the company is not in real estate, there may need to be a clear business rationale for the purchase (e.g., using the property as office space or housing for employees).

Tax Implications

Corporation Tax: The company may be liable for property-related taxes like stamp duty and capital gains tax (if the property is sold later).
Income Tax: If the company rents out the property, the rental income will be subject to corporation tax. Personal tax implications for the directors or shareholders may also arise depending on how the property is used or sold.

Mortgage Considerations: If the company needs a mortgage to purchase the property, the bank will assess the company's financial stability and creditworthiness. The company, rather than individual directors, will be responsible for the mortgage repayments.

Impact on Directors and Shareholders: If the residential property is for personal use (e.g., the directors or shareholders are living in it), this could lead to additional tax implications, like it being considered a “benefit in kind,” which could result in personal tax liabilities for those individuals.

Financing: The company might also use company funds, loans, or raise capital to finance the property purchase. If company directors have used their personal assets or loans to help finance the purchase, it could create additional personal risk.

Regulations and Restrictions: Depending on the jurisdiction and local regulations, certain rules might govern how a private limited company can purchase residential property. In some regions, there are specific rules about corporate ownership of residential real estate, particularly in terms of foreign ownership or the company's business activities.

Consult a legal or financial advisor before buying property for private limited company, as various local laws and tax rules will apply.