Are you also a shareholder in UK company? If yes, then the sale of shares will also be taxable in UK.
Prima facie, an oral agreement will not help you to save taxes.
Getting money from abroad
Hi, I am director of a company registered in UK and I am coming out of the company due to some personal issues. Based on my shares and current company valuation I will be receiving an amount of around 300,000 pound which the company will send to my bank account here in India. Can you suggest me a way where I can save some money from the direct 33% (or whatever applicable). Also I will be paying 20% of my money to a person which was an oral agreement between two of us as he worked for me with very neglible amount. How to consider this also to save some money for me. Thanks in advance. Amit M
Asked 4 years ago in Income Tax
Yes, I am shareholder in the UK company. but this will not be direct selling of the shares.. but mutual understanding of me coming out and investors paying me that money. Regarding oral agreement, can you guide me to make it a legal one so that I can save something. I am currently loosing from all angles. Thanks U
Asked 4 years ago
You must first bifurcate the amount you are getting for shares and other fees if any you'll be getting.
If this amount relates to just shares then you need to calculate capital gain tax and pay it accordingly even if you are transferring your right to other members but legally its capital gain tax and to save such capital gain tax you can invest the sale amount in new house if you own only one at this time u/s 54F paying the money to someone else wont help as its capital gain amount.
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Thank you.
Even if it's not a direct sale, it is more likely than not that capital gain will be applicable. However, you need to consult someone who is UK tax specialist.
Regarding oral agreement, we will have to understand the arrangement in detail to conclude anything.
Dear Sir,
Hope you are doing well !!
You will be liable to pay capital gain taxes in India.
You can save the taxes either by reinvesting in residential property or by reinvesting in bonds specified u/s 54EC.
Other than that, there is no way to save the taxes legally.
Further, could you please share the details of oral agreement with us?
We will consult with our lawyer and get back to you.
What I want to know is if I get say 1cr from the sale of those shares or dividend money due to exiting from the UK business, what will be in my hand after paying the tax? Will there be direct 33% tax deducted or is there any way to reduce it. What is the best case scenario?
Asked 4 years ago
If you get the money out of capital gain i.e. from sale of shares you'll have to pay 20% tax on the gain amount and if you receive dividend you will pay tax as per slab rates so in non of the case you will have to pay straight 33% tax and to save tax in first case you can invest the sale amount in flat.
Thank you
Hi,
You will have to pay 20% tax(plus cess and surcharge) on the profit arising from sale of shares (not on entire 1 cr). Further, you can also claim credit of UK taxes in India.
Dividend will be taxable at 30% plus cess plus surcharge. Further, you can also claim credit of UK taxes in India.
Surcharge rate depends upon your total income. It varies from 10% to 25% on tax.
Dear Sir,
The tax liabilities would be as below:
1.On shares: 20%+ 4%(Cess)+Surcharge (depend on your income)
2.Dividend- It will be taxable as per your slab rate. You will be falling in 30% slab rate.
However, you can take the credit of foreign taxes paid in UK as per DTAA.
The money from a corporate can be taken either by way of sale of shares or dividend. Dividend need to be uniformly distributed to all shareholders, which is not the case. Hence this receipt is most likely sale of shares for you. You can claim cost of shares for calculating capital gains. This was the straight forward way.
Firstly, you must not get the 100% credited into your Indian account. You should ask the company only to remit 80% and 20% directly to the person you need to pay.
Also, is there any taxes paid in UK on this income payable to you, then you can claim credit for those taxes in India and thereafter miniscule amount may be paid in India, depending on the amount of tax paid in UK.
Hello,
Capital Gain would be applicable on the amount received for those shares, which would be taxable at 20% plus cess 4%.
While the dividend amount received would be taxable at slab rates. Depending upon your total income.
Regarding 20% payment to a person, the oral agreement won't be sufficient. Making it part of the transfer(sale of shares) expenses would be better.
Regards,
CA Hunny Badlani
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