Dear Sir/Madam,
Thanks for reading this question and deciding to help. My relative owns a company registered under The Companies Act and it has 3 individual members. The business of the company is to rent out shop spaces owned by the company, in the name of the company.
The Rent received from such activity is distributed to the members in the form of a dividend and the Company maintains it's own account in a bank, complying with the relevant sections of the Companies Act, the Dividend Distribution Tax is deducted at the respective rate before giving any income to the members.
The members also individually pay tax under the respective slab rate under head 'Income from Business and Profession'
The members now want to sell off the properties and liquidate the company as there remains no object of business with it. They want to know what would be the best alternative considering the tax implications if :
a) The company sells off the properties first, pays the Capital Gains Tax and distributes the proceeds to members individually, the members then apply for liquidation. Do the members have to pay any separate tax on selling apart from Capital Gains Tax which is paid by the company?
or
b) The company transfers the properties in the name of the members and applies for liquidation and the members sell off the property.
Among these two options, it would be really helpful if a least tax implication alternative is decided and I request you to provide the tax incidences in each of the alternatives.
Request to answer in simple words which can be easily understood and request to answer as soon as possible. Thanks a lot. :)
