INDIA Law and Practice Contributed by: Vivek Chandy, Archana Tewary, Kumarmanglam Vijay and Megha Arora, JSA
State governments are authorised to acquire land for public purposes. The current land acqui - sition statute prescribes: • the payment of compensation of up to four times the market value in rural areas and twice the market value in urban areas; • safeguards for tribal communities/other disadvantaged groups, compensation for lost livelihood, and caps on the acquisition of multi-crop and agricultural land; • the return of unutilised land to landowners; and • the requirement to obtain affected parties’ consent for the acquisition of land for com - panies, except where the acquired land is controlled by the government. Land parcels acquired by the state govern - ments vest with the state governments free of all encumbrances and any title defects. 2.10 Taxes Applicable to a Transaction Any transfer of property requires the payment of statutory duties, such as stamp duty and cess and registration fees (which differ from state to state). Where the asset is under construction, GST is also to be paid by the seller. However, GST is an indirect tax, so it can be recovered from the buyer. In asset transfers, the buyer generally pays the duties, unless they are otherwise agreed to be shared between parties. Most stamp acts pro - vide that, where there is no agreement to the contrary, stamp duty will be paid by the purchas - er on sale and by the lessee on lease. For share transfer transactions, stamp duty at 0.015% of the consideration is payable. Stamp duty on conveyance need not be paid if the property is contributed into a partnership firm.
However, in most cases any exit from the part - nership by the original contributor will attract the payment of stamp duty as if it is a conveyance. Exemptions from the payment of stamp duty and certain tax benefits are available to entities oper - ating out of free-trade zones known as “special economic zones”. Generally, capital gains tax would also be pay - able by the seller on the transfer of property (directly or indirectly). In the case of tax residents of India, the tax rate would range from 20% (plus surcharge and cess) for long-term capital gains to 30% (plus surcharge and cess) for short-term capital gains, depending on the period for which the asset being transferred is held. Unlisted shares or immovable property held for more than 24 months are considered as long-term capi - tal assets, else they are considered short-term capital assets and taxed accordingly. 2.11 Legal Restrictions on Foreign Investors Persons resident outside India can acquire property or invest in real estate in India only in accordance with FEMA. While foreign investment into real estate con - struction and development has been liberal - ised significantly, certain restrictions remain. An important restriction is that the investment has to be locked in for three years, calculated with reference to each tranche of investment, except in cases where the construction of “trunk infrastructure” is completed. The transfer of a stake from a person resident outside India to another person resident outside India, without repatriation of the foreign investment, is subject to neither lock-in nor government approval. The lock-in is also not applicable to the construction of hotels and tourist resorts, hospitals, special
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