INDIA Law and Practice Contributed by: Vivek Chandy, Archana Tewary, Kumarmanglam Vijay and Brijita Prakash, JSA
• the requirement to obtain affected parties’ consent for land acquisition for companies, except where the acquired land is controlled by the government. Land parcels acquired by state governments vest with the governments free of all encum - brances and any title defects. 2.10 Taxes Applicable to a Transaction Any transfer of property requires the payment of statutory duties, including stamp duty, cess and registration fees (which differ from state to state). Where the asset is under construction, GST is also paid by the seller, which can be recovered from the buyer by the seller. In asset transfers, the buyer generally pays duties, unless otherwise agreed. Most stamp acts provide that where there is no agreement to the contrary, stamp duty will be paid by the purchaser on sale and by the lessee on lease. For share transfer transactions, stamp duty at 0.015% of the consideration is payable. In some states, stamp duty at rates applicable to a sale is not paid if property is contributed into a part - nership firm. However, any exit from the partner - ship by the original contributor will usually attract payment of stamp duty as if it is a conveyance. Exemptions on payment of stamp duty and cer - tain tax benefits are available to entities operat - ing out of special economic zones (SEZs). Generally, capital gains tax would also be pay - able by the seller on transfer of property (directly or indirectly). For tax residents of India, the tax rate would range from 12.5% (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 capital assets. Depreciable property would generally be considered a short-term capital asset. 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 in construction and development has been liberalised significantly, certain restrictions remain, including that the investment must be locked in for three years, calculated with reference to each tranche of investment, unless the construction of “trunk infrastructure” is completed. Transfer of stake between persons resident outside India, without repatriation of foreign investment, is not subject to lock-in. The lock-in is also not applicable to construction of hotels and tourist resorts, hospi - tals, SEZs, educational institutions and old-age homes. FDI is permitted in the operation and manage - ment of townships, malls/shopping complexes and business centres, with three years’ lock- in. Earning of rent/income on lease of property not amounting to transfer is not considered real estate business. Exchange control laws regulate foreign invest - ments in India by countries that have land bor - ders with India. If the investing/acquiring entity or beneficial owner in an investing/acquiring entity is an entity set up in, or an individual resident in, such a country, the investing/acquiring entity would require prior government approval for its proposed investment (primary or secondary) in an Indian company. “Beneficial ownership” has
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