Faq Section 49 2aa Cost Acquisition
India-specific preparation guide
Faq Section 49 2aa Cost Acquisition needs current-law checks, portal verification, documents and a precise brief before you compare experts on the WorkIndex work index.
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Faq Section 49 2aa Cost Acquisition is best handled after identifying the exact scope, period, applicable portal and documents. Use this page to prepare a sharper expert brief instead of relying on generic summaries.
- Identify the exact period, assessment year or tax year, income head, entity type and portal status before applying Faq Section 49 2aa Cost Acquisition.
- Reconcile source data such as AIS/TIS, Form 26AS, books, bank statements, invoices, notices and prior returns.
- Ask the expert to flag regime choice, deduction limits, disclosure schedules, penalty exposure and expected deliverables.
- Do not rely on old blog summaries where forms, deadlines, sections or portal utilities have changed.
Accuracy notes before you act
- Section 47(xiiib) provides capital gains tax exemption on company-to-LLP conversions only if the company's annual turnover is under ₹60 lakh and total assets are under ₹5 crore in any of the 3 preceding years.
- Winding up/dissolution is a formal process involving the disposal of assets and settlement of liabilities, whereas Strike-off (Form STK-2 for companies, Form 24 for LLPs) is a simplified closure for inactive entities with zero assets and liabilities.
- Converting a partnership firm or LLP to a company under Section 366 (Form URC-1) requires a mandatory 21-day public notice in two newspapers to invite public objections.
- Stamp duty on asset transfers during conversions varies by state and must be verified. A written No Objection Certificate (NOC) is mandatory from all secured creditors.
Documents and facts to keep ready
- PAN, Aadhaar, GSTIN, CIN/LLPIN, TAN or registration details where applicable.
- Relevant financial year, assessment year, tax year, return period, due date and notice number.
- Books, invoices, payroll, bank statements, contracts, prior filings and portal screenshots.
- Expected output: filing, registration, correction, advisory memo, notice response, audit report or recurring compliance.
Common mistakes to avoid
- Using an old due date, old section number or old form without checking the live portal.
- Posting a vague requirement without period, entity type, city, documents and deadline.
- Comparing quotes without clarifying government fee, professional fee and exclusions.
- Skipping reconciliation with AIS/TIS, books, Form 26AS, GST data or bank records.
- Treating explanatory SEO content as final tax, legal, audit or investment advice.
Frequently Asked Questions
1. What is a tax-neutral conversion of a company to an LLP?
Under Section 47(xiiib) of the Income Tax Act, the conversion of a private or unlisted public company to an LLP is exempt from capital gains tax if specific conditions regarding turnover (under ₹60 lakh), asset size (under ₹5 crore), and shareholding are met.
2. What are the conditions under Section 47(xiiib) for company-to-LLP conversion?
Key conditions: (1) Turnover of the company must not exceed ₹60 lakh in any of the 3 preceding years, (2) Total assets must not exceed ₹5 crore in any of the 3 preceding years, (3) Shareholders must become partners in the same proportion, and (4) No direct/indirect payment can be made to partners for 3 years except their profit share.
3. What happens if Section 47(xiiib) conditions are violated within 3 years of conversion?
If any conditions are violated within 3 years, the capital gains exemption is withdrawn, and the gains will be taxed in the hands of the successor LLP or the partners in the year the violation occurs.
4. What is the URC-1 form, and when is it used for Section 49 2Aa Cost Acquisition?
Form URC-1 (under Section 366 of the Companies Act) is the application filed with the ROC for registering an existing partnership firm, LLP, or cooperative society as a joint-stock company. This is central to Section 49 2Aa Cost Acquisition workflows.
5. Why is a 21-day public notice required during company conversion?
Under the Companies (Authorized to Register) Rules, a partnership or LLP converting to a company must publish a public notice in Form URC-2 in two newspapers (English and vernacular) 21 days before filing URC-1, to allow creditors or the public to raise objections.
6. What is the difference between Strike-off and Winding up of a company?
Strike-off (Form STK-2) is a fast-track closure for inactive companies with zero assets and liabilities. Winding up (voluntary or through NCLT) is a formal liquidation process involving the disposal of assets and settlement of liabilities.
7. How does an LLP close its business via Strike-off?
An LLP can apply for strike-off using Form 24 under Rule 37(1A) of the LLP Rules, provided it has been inactive for at least one year and has zero assets, zero liabilities, and NOC from creditors.
8. Is stamp duty applicable when converting a partnership firm to an LLP?
Generally, conversion of a partnership to an LLP is exempt from stamp duty in many states if there is no transfer of property to third parties. However, stamp duty rules are state-specific and must be verified.
9. What is the tax treatment of asset transfer on partnership dissolution?
Under Section 45(4) and Section 9B, the distribution of capital assets or stock-in-trade to partners upon dissolution or reconstitution is treated as a transfer, and capital gains tax is payable by the firm based on the fair market value of the assets.
10. What is the difference between a partnership dissolution and a firm dissolution?
Dissolution of a partnership refers to a change in the relation of partners (e.g. exit of a partner), but the business continues. Dissolution of a firm means the complete breakdown of the partnership, leading to closure of the business and settlement of accounts.
11. What is the corporate compliance requirement for Strike-off?
Before filing STK-2, the company must file its pending financial statements (AOC-4) and annual returns (MGT-7) up to the end of the financial year in which it ceased operations, hold a board meeting, and obtain shareholder consent (75%).
12. Can a company with pending IT litigation apply for Strike-off?
No. A company cannot be struck off if there are pending litigations, open tax assessments, notices under Section 148, or unpaid statutory liabilities. The ROC will verify tax clearances before approving the strike-off.
13. What is the cost of acquisition of assets in an LLP converted from a company?
Under Section 49(1)(iii)(e), the cost of acquisition of the assets in the hands of the LLP will be the cost of the assets in the hands of the predecessor company.
14. Is an NOC from secured creditors mandatory for entity conversion?
Yes. To convert a partnership or LLP to a company, or a company to an LLP, you must obtain a written No Objection Certificate (NOC) from all secured creditors before submitting the ROC application.
15. How are accumulated profits taxed on company-to-LLP conversion?
The accumulated profits of the company are transferred to the LLP. If the conversion is tax-neutral under Section 47(xiiib), this transfer is not treated as a dividend distribution under Section 2(22)(e), and no tax is payable at the time of conversion.