LLP taxation

Sir you would have used the exemption under section 47(xiiib) while converting your Pvt Ltd into LLP and because of which you did not have to pay any capital gain on such transfer and one of the condition in that section is that the partner in LLP won't get any accumulated profit of company till 3 years of conversion and since the capital gain earned is a part of accumulated profit and it's only been 2.5 years since conversion you must wait for atleast next six month and then you can distribute the profit among partner.

Since your FD will also mature after 6 months and 3 years of conversion will also convert them so you can distribute such amount without any violation of clause f of section 47(xiiib).

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Thank you

Dear Sir,

Hope you are doing well !

For availing section 47(xiiib) exemption, you will have to satisfy the clause (f) to proviso to section 47(xiiib) of the act.

" No amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of three years from the date of conversion".

Please note that 3 years should be counted from date of conversion.

It's only been one month since conversion you must wait for atleast 2 years and eleven month and then you can distribute the profit among partner without any taxability. Otherwise, it will be violation of clause f to proviso to section 47(xiiib) of the act.

Thanks & Regards,

Payal Chhajed

Sir thank you for your feedback.

It's clearly mention in section 47 that capital gain on the conversion of Pvt Ltd. Into LLP will be exempted only if no accumulated profit is distributed among the partners directly or indirectly till 3 years from the date of conversion, which is standing in the account of company at the time of conversion.

Thus this clears that you can't distribute the profit on sale of land to the partners till 3 years or else the LLP will have to pay capital gain on such conversion.

Hope now I have read your question correctly and answered it.

If you find any other mistake do let me know and also provide your valuable feedback.

Thank you

Hi,

- No amount can be paid for a period of three years from the date of conversion. Need to wait for 2 years and 11 months.

Thanks

Since the conversion has just happened one month back, you will need to wait for another 2 years and 11 months before you can withdraw the amount from the firms balances.

Regards,

Nikhil.