Firstpost
  • Home
  • Video Shows
    Vantage Firstpost America Firstpost Africa First Sports
  • World
    US News
  • Explainers
  • News
    India Opinion Cricket Tech Entertainment Sports Health Photostories
  • Asia Cup 2025
Apple Incorporated Modi ji Justin Trudeau Trending

Sections

  • Home
  • Live TV
  • Videos
  • Shows
  • World
  • India
  • Explainers
  • Opinion
  • Sports
  • Cricket
  • Health
  • Tech/Auto
  • Entertainment
  • Web Stories
  • Business
  • Impact Shorts

Shows

  • Vantage
  • Firstpost America
  • Firstpost Africa
  • First Sports
  • Fast and Factual
  • Between The Lines
  • Flashback
  • Live TV

Events

  • Raisina Dialogue
  • Independence Day
  • Champions Trophy
  • Delhi Elections 2025
  • Budget 2025
  • US Elections 2024
  • Firstpost Defence Summit
Trending:
  • Charlie Kirk shot dead
  • Nepal protests
  • Russia-Poland tension
  • Israeli strikes in Qatar
  • Larry Ellison
  • Apple event
  • Sunjay Kapur inheritance row
fp-logo
Budget 2016: To boost infra, encourage firms to convert to LLPs
Whatsapp Facebook Twitter
Whatsapp Facebook Twitter
Apple Incorporated Modi ji Justin Trudeau Trending

Sections

  • Home
  • Live TV
  • Videos
  • Shows
  • World
  • India
  • Explainers
  • Opinion
  • Sports
  • Cricket
  • Health
  • Tech/Auto
  • Entertainment
  • Web Stories
  • Business
  • Impact Shorts

Shows

  • Vantage
  • Firstpost America
  • Firstpost Africa
  • First Sports
  • Fast and Factual
  • Between The Lines
  • Flashback
  • Live TV

Events

  • Raisina Dialogue
  • Independence Day
  • Champions Trophy
  • Delhi Elections 2025
  • Budget 2025
  • US Elections 2024
  • Firstpost Defence Summit
  • Home
  • Business
  • Budget 2016: To boost infra, encourage firms to convert to LLPs

Budget 2016: To boost infra, encourage firms to convert to LLPs

FP Archives • February 17, 2016, 17:25:57 IST
Whatsapp Facebook Twitter

Limited Liability Partnership is emerging as an attractive entity structure due to lesser administrative compliances while retaining the limited liability of company structure

Advertisement
Subscribe Join Us
Add as a preferred source on Google
Prefer
Firstpost
On
Google
Budget 2016: To boost infra, encourage firms to convert to LLPs

Pankaj Bagri & Prashant Deshmukh In the investment world, greater risk is considered as seeds to grow more returns. However, while deciding entity structure, the investor would often go for a structure which provides a definite maximum loss. That is how company structure with limited liability up to share capital became more popular as oppose to partnership firm structure where partner’s liability remains unlimited. However, from corporate governance perspective, companies are subject to cumbersome compliances. [caption id=“attachment_2630194” align=“alignleft” width=“380”] ![Many infra companies are keen to use LLP entity structure for carrying business in India](https://images.firstpost.com/wp-content/uploads/2016/02/infrastructure_reuters.jpg) Many infra companies are keen to use LLP entity structure for carrying business in India[/caption] However, Limited Liability Partnership (‘LLP’) is emerging as an attractive entity structure due to lesser administrative compliances while retaining the limited liability of company structure. Even from income-tax perspective, LLPs are treated at par with Partnership Firms. As such, LLP is liable to tax on its income while income received by partners from LLP is not taxable in the hands of the partners. Further, unlike companies, LLPs are not required to pay any dividend distribution tax. Due to government bidding requirements, loan facilitation or for limiting a project related risk, etc., Infrastructure companies generally establish a separate Special Purpose Vehicle (‘SPV’) company for each project. Accordingly, repatriating profits generated at SPV level to Parent company becomes cost inefficient due to dividend distribution tax. An LLP option can address this issue and one can think of converting the SPV Company into LLP. However, the existing provisions of the Income-tax Act, 1961 (‘Act’) provides for a tax neutral conversion of companies into LLP subject to satisfaction of various conditions. One of the conditions to be satisfied is that the total sales, turnover or gross receipts in the business in any of the three previous years does not exceed Rs 60 lakhs. Another condition requires the profit-sharing ratio of the erstwhile shareholders of the company in the LLP to remain 50% or more of the profits of the LLP at any time during the period of 5 years from the date of conversion. Since infrastructure is a capital intensive sector, a turnover of one project often runs in to crores of rupees. As such, it is barely possible for an existing infrastructure company to meet the aforesaid turnover criteria of Rs 60 lakhs in any of the three previous years. Many infrastructure companies are keen to use LLP entity structure for carrying business in India, however, conditions prescribed for tax exemption is a major hindrance for converting to LLP. The government needs to revisit the conditions relating to Rs 60 lakh limit and continuity of 50% shareholding so as to encourage infrastructure companies to opt for LLP entity structure. Further, section 80-IA of the Act provides for deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. One of the conditions for claiming such tax benefit by an enterprise in infrastructure sector is that such infrastructural facility is owned by a company registered in India. As such, this section requires an amendment so that even LLP in infrastructure sector can claim tax holiday under section 80-IA. Since Government has time and again highlighted its focus on improving the infrastructure sector for strengthening of economy, infrastructure sector has set its eye on the upcoming budget with a hope that there will be some good news on LLP front. Pankaj Bagri is a director, business tax, and Prashant Deshmukh, manager, business tax at Deloitte Haskins & Sells LLP

Tags
Arun Jaitley Infrastructure NDA dividend distribution tax LLP Limited Liability Partnerships Union Budget 2016 Taxes 2016 Infra 2016
End of Article
Written by FP Archives

see more

Latest News
Find us on YouTube
Subscribe
End of Article

Impact Shorts

Chennai Ranks #1 in Challan Checks: ACKO Insights for Smarter Car and Two Wheeler Insurance Decisions

Chennai Ranks #1 in Challan Checks: ACKO Insights for Smarter Car and Two Wheeler Insurance Decisions

Chennai leads India in challan checks, with drivers checking their e-challans over 5 times a month on average. Helmet non-compliance is the most broken rule, accounting for 34.8% of all traffic offences in Chennai. Regular digital challan checks help drivers avoid hefty fines, promote safe driving, and improve insurance premiums.

More Impact Shorts

Top Stories

Charlie Kirk, shot dead in Utah, once said gun deaths are 'worth it' to save Second Amendment

Charlie Kirk, shot dead in Utah, once said gun deaths are 'worth it' to save Second Amendment

From governance to tourism, how Gen-Z protests have damaged Nepal

From governance to tourism, how Gen-Z protests have damaged Nepal

Did Russia deliberately send drones into Poland’s airspace?

Did Russia deliberately send drones into Poland’s airspace?

Netanyahu ‘killed any hope’ for Israeli hostages: Qatar PM after Doha strike

Netanyahu ‘killed any hope’ for Israeli hostages: Qatar PM after Doha strike

Charlie Kirk, shot dead in Utah, once said gun deaths are 'worth it' to save Second Amendment

Charlie Kirk, shot dead in Utah, once said gun deaths are 'worth it' to save Second Amendment

From governance to tourism, how Gen-Z protests have damaged Nepal

From governance to tourism, how Gen-Z protests have damaged Nepal

Did Russia deliberately send drones into Poland’s airspace?

Did Russia deliberately send drones into Poland’s airspace?

Netanyahu ‘killed any hope’ for Israeli hostages: Qatar PM after Doha strike

Netanyahu ‘killed any hope’ for Israeli hostages: Qatar PM after Doha strike

Top Shows

Vantage Firstpost America Firstpost Africa First Sports
Latest News About Firstpost
Most Searched Categories
  • Web Stories
  • World
  • India
  • Explainers
  • Opinion
  • Sports
  • Cricket
  • Tech/Auto
  • Entertainment
  • IPL 2025
NETWORK18 SITES
  • News18
  • Money Control
  • CNBC TV18
  • Forbes India
  • Advertise with us
  • Sitemap
Firstpost Logo

is on YouTube

Subscribe Now

Copyright @ 2024. Firstpost - All Rights Reserved

About Us Contact Us Privacy Policy Cookie Policy Terms Of Use
Home Video Shorts Live TV